Caladrus Biosciences
Annual Report 2001

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KCaladrius Biosciences, Inc. - CLBSFiled: April 15, 2002 (period: December 31, 2001)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K(Mark One)[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended December 31, 2001 OR[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to -------- -------- Commission file number: 0-10909 CORNICHE GROUP INCORPORATED (Exact name of registrant as specified in its charter) Delaware 22-2343568 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 610 South Industrial Boulevard Suite 220 Euless, Texas 76040 (Address of principal executive offices) (Zip Code)Registrant's telephone number, including area code: (817) 283-4250Securities registered pursuant to Section 12(b) of the Act: None.Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001 par valueIndicate by check mark whether the registrant (1) has filed all reports requiredto be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes [X] No [ ]Indicate by check mark if disclosure of delinquent filers pursuant to Item 405of Regulation S-K is not contained herein, and will not be contained, to thebest of Registrant's knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. [ ]The aggregate market price of the voting and nonvoting common equity held bynon-affiliates of the Registrant as of March 12, 2002 was approximately $3.0million. (For purposes of determining this amount, only directors, executiveofficers, and 10% or greater stockholders have been deemed affiliates).On March 12, 2002, 22,290,710 shares of the Registrant's common stock, par value$0.001 per share, were outstanding.This Annual Report on Form 10-K and the documents incorporated herein contain"forward-looking statements" within the meaning of the Private SecuritiesLitigation Reform Act of 1995. Such forward-looking statements involve known andunknown risks, uncertainties and other factors which may cause the actualresults, performance or achievements of the Company, or industry results, to bematerially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements. When used in thisAnnual Report, statements that are not statements of current or historical factSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.may be deemed to be forward-looking statements. Without limiting the foregoing,the words "plan", "intend" "may," "will," "expect," "believe", "could,""anticipate," "estimate," or "continue" or similar expressions or othervariations or comparable terminology are intended to identify suchforward-looking statements. Readers are cautioned not to place undue reliance onthese forward-looking statements, which speak only as of the date hereof. Exceptas required by law, the Company undertakes no obligation to update anyforward-looking statements, whether as a result of new information, futureevents or otherwise. PART IITEM 1. BUSINESSCorniche Group Incorporated ("the Company") is a provider of extended warrantiesand service contracts via the internet through its web sitewarrantysuperstore.com.HISTORYThe Company was incorporated under the laws of the State of Delaware inSeptember 1980 under the name Fidelity Medical Services, Inc. From its inceptionthrough March 1995, the Company was engaged in the development and sale ofmedical imaging products through a wholly-owned subsidiary. As a result of areverse merger on March 2, 1995 with Corniche Distribution Limited and itssubsidiaries the Company was engaged in the retail sale and wholesaledistribution of stationery and related office products in the United Kingdom.Effective March 25, 1995 the Company sold its medical imaging productssubsidiary. On September 28, 1995 the Company changed its name to Corniche GroupIncorporated. In February 1996, the Company's United Kingdom operations wereplaced in receivership by their creditors. Thereafter through March 1998 theCompany was inactive. On March 4, 1998, the Company entered into a StockPurchase Agreement with certain individuals (the "Initial Purchasers") wherebythe Initial Purchasers acquired in aggregate 765,000 shares of a newly createdSeries B Convertible Redeemable Preferred Stock. Thereafter the InitialPurchasers endeavored to establish for the Company new business operations inthe property and casualty specialty insurance and warranty/service contractsmarkets. On September 30, 1998 the Company acquired all of the capital stock ofStamford Insurance Company Limited. ("Stamford"). On April 30, 2001 the Companysold Stamford and is no longer involved in property and casualty specialtyinsurance. See "Discontinued Operations" below.RECENT DEVELOPMENTSOn January 7, 2002, the Company entered into a Stock Contribution ExchangeAgreement (the "Exchange Agreement") and a Supplemental Disclosure Agreement(together with the Exchange Agreement, the "Agreements") with StrandTekInternational, Inc., a Delaware corporation ("StrandTek"), certain ofStrandTek's principal shareholders and certain non-shareholder loan holders ofStrandTek (the "StrandTek Transaction"). The Exchange Agreement was amended onFebruary 11, 2002 and the parties are currently negotiating a further amendmentand extension. Accordingly, no assurances can be given that the transaction willbe consummated or the precise terms of the amendment. All descriptions of theStrandTek Transaction herein are based on the Company's current assumptions asto the final terms. Assuming the consummation of the transactions contemplatedby the Agreements, StrandTek will become a majority owned subsidiary of theCompany and the former shareholders of StrandTek will control the Company.StrandTek is a high-tech manufacturer with proprietary technology producingmelt-blown polypropylene for acoustical and thermal insulation applications.StrandTek produces on a commercial scale, through a patented process, a loftedthermal insulation wadding material as a replacement for cotton shoddy andfibreglass used for 2acoustical and insulation applications. StrandTek believes that its material istechnically superior to existing materials, 100% recyclable, lighter, easier touse and handle in commercial applications and provides significant cost savingsover cotton shoddy and fibreglass for engineered parts.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The main applications for the material are in the automotive, appliance, homeand office building markets. StrandTek has achieved acceptance for its productwith a number of Fortune 100 companies, which are already switching fromtraditional materials to the StrandTek product. Following extensive evaluationand testing by several potential major customers StrandTek now suppliescompanies such as GE, Maytag and Daimler Chrysler. Additionally, GM has approveda specification for the StrandTek product and StrandTek is in discussions withseveral other major OEM's within these industries. Given the global nature ofthe industries and companies StrandTek is supplying, management is activelyevaluating the potential for a European plant to meet demand of existingcustomers in their European manufacturing facilities.StrandTek currently has a plant in excess of 200,000 square feet based inChicago, with four manufacturing lines and two die-cutting lines and is in theprocess of building one new line. Plans are well in hand for additional lines tomeet the anticipated increase in demand for its product. Given that StrandTekhas been in ongoing development of its extrusion technology, not all of thelines have the same output capacity. However, within the existing factory thereis scope to build four more full-scale extrusion lines, which would have asignificant impact on the total revenue generation of the business.Pursuant to the terms of the Agreements, as amended to date and as expected tobe further amended, the Company will acquire approximately 178,000,000 shares orapproximately 98% of the common stock, $.0001 par value per share, of StrandTekfrom certain principal shareholders of StrandTek. Such principal shareholderswill exchange their shares of StrandTek common stock for approximately 8,606,000shares of the Company's common stock, par value $0.001 ("Common Stock") andapproximately 1,355,000 shares of the Company's Series D Convertible PreferredStock convertible into 135,500,000 common shares, as adjusted pursuant to theAgreements. In addition, such principal shareholders and certain non-shareholderloan holders have agreed to exchange certain of their outstanding loans due fromStrandtek, in the amount of $22 million in the aggregate, and the Company willissue 220,000 shares of its Series C 7% Convertible Preferred Stock. Upon theconsummation of the transaction contemplated by the Agreements, the principalshareholders and the non-shareholder loan holders will own more than a majorityof the outstanding shares and voting power of the Company.In January 2002 the Company advanced to StrandTek a loan of $1 million on anunsecured basis, which is personally guaranteed by certain of the principalshareholders of StrandTek and a further loan of $250,000 on February 19, 2002 onan unsecured basis. Such loans are due on the earlier of March 31, 2002 (subjectto extension if the agreements are amended) or forty five days after thetermination of the Agreements.The transaction is expected to close during April 2002 and is contingent uponcertain closing conditions, including, obtaining financing of approximately $11million and a number of other financial, legal and business conditions. TheCompany is attempting to secure this financing through an unregistered privateplacement of its securities. Upon the closing of the transaction, Jerome Bauman,President of StrandTek, will be appointed Chairman and Chief Executive Officerof the Company and William Buckles, Chief Financial Officer of StrandTek, willbe appointed Chief Financial Officer, Treasurer and Secretary of the Company andRonald Basar will be appointed Vice President. There can be no assurance givenat this time that the financing can be satisfied on terms reasonably acceptableto the parties or that the other financial, legal and business conditions can bemet or that a transaction can be consummated. Further information aboutStrandTek is available in its Form 10-K for its fiscal year ended September 30,2001 and in its Form 10-Q for the fiscal quarter ended December 31, 2001 on filewith the SEC.The following summarizes the terms of the Series C 7% Convertible PreferredStock. The Series C Preferred Stock shall rank senior to the Company's Series DPreferred Stock and Common Stock with respect to the payment of dividends and tothe distribution of assets upon liquidation, dissolution or winding up.Commencing July 1, 2002, the holders of shares of Series C Preferred Stock shallbe entitled to receive, when and as declared 3by the Board of Directors of the Company, cumulative dividends at the rate of 7%per annum on each share of Series C Preferred Stock, subject to appropriateadjustment. The holder of any share of Series C Preferred Stock shall have theSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.right, at such holder's option, to convert each share of the Series C PreferredStock into one hundred shares of the Company's Common Stock, plus additionalshares for accrued and unpaid dividends, subject to certain adjustments.The following summarizes the terms of the Series D Preferred Stock. The Series DPreferred Stock shall rank junior to the Company's Series C 7% ConvertiblePreferred Stock with respect to the payment of dividends and to the distributionof assets upon liquidation, dissolution or winding up, and pari passu with theCommon Stock. So long as any shares of the Series D Preferred Stock areoutstanding, no dividend shall be declared or paid upon the Common Stock or uponany other stock ranking junior to, or on a parity with, the Series D PreferredStock. The holder of any share of Series D Preferred Stock shall have the right,at such holder's option, to convert each share of the Series D Preferred Stockinto one hundred shares of the Company's Common Stock, subject to certainadjustments. The holders of shares of the Series C Preferred Stock and Series DPreferred Stock shall have the same voting rights as the holder of that numberof shares of Common Stock into which a share of Series C or Series D PreferredStock could be converted.The Company and StrandTek anticipate that the contribution and exchange of stockand cash for capital stock of the Company shall constitute a nontaxable transferof property and the transaction is contingent upon StrandTek receiving a taxopinion to that effect.The securities being exchanged in the transaction have not been registered underthe Securities Act of 1933 and may not be offered or sold in the United Stateswithout the effectiveness of a resale registration statement or an applicableexemption from the registration requirements. The principal shareholders and thenon-shareholder loan holders shall be entitled to demand registration rights forthe Common Stock issued to them and the Common Stock issuable upon theconversion of the Series C and Series D Preferred Stock.CURRENT BUSINESS OPERATIONSThe business of the Company today comprises the sale of extended warranties andservice contracts via the Internet at www.warrantysuperstore.com. No decisionhas been made about the future of the warranty and service contract business. Itis anticipated that the new Board of Directors will consider the contraction,sale or termination of the warranty and service contract business after theconsummation of the StrandTek Transaction. There can be no assurance, if adecision to sell is made, that the Company will be able to complete the sale ofsuch business on terms favorable to the Company or at all.WarrantySuperstore.com Internet BusinessThe Company's primary business focus is the sale of extended warranties andservice contracts over the Internet covering automotive, home, office, personalelectronics, home appliances, computers and garden equipment. The Company offersits products and services in the United States in states that permit programmarketers to be the obligor on service contracts. Currently this representsapproximately 37 states for automobile service contracts and approximately 43states for other product categories. While the Company manages most functionsrelating to its extended warranty and service contracts, it does not bear theeconomic risk to repair or replace products nor does it administer the claimsfunction. The obligation to repair or replace products rests with the Company'sappointed insurance carriers. During fiscal 2001 Great American InsuranceCompany and American Home Shield were the Company's appointed carriers, GreatAmerican Insurance Company providing contractual liability insurance coveringthe obligation to repair or replace products under the Company's automobile andconsumer products extended warranties and service contracts and American HomeShield covering all home warranty contracts. In March 2002 National CasualtyCompany (a member of Nationwide Group) replaced Great American Insurance Companyand Home Warranty of America (a division of Near North National Group) replacedAmerican Home Shield. The Company is responsible for the marketing, recordingsales, collecting payment and reporting contract details and paying premiums tothe insurance carriers. In addition the Company provides 4information to the insurance carriers' appointed claims administrators whohandle all claims under the Company's contracts, including the payment ofclaims.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.The Company commenced operations initially by marketing its extended warrantyproducts directly to the consumer through its web site. During fiscal 2000 theCompany developed enhanced proprietary software to facilitate more efficientprocessing and tracking of online warranty transactions. This provided theCompany with the ability to deliver its products over the Internet through anumber of distribution channels by enabling it to supply a number of differentextended warranty service contracts on a co-branded or private label basis tocorporations, by embedding the Company's suite of products on such corporationsweb sites. This new capability was launched in January 2001. As a result theCompany now has four distinct distribution channels: (i) direct sales toconsumers, (ii) co-branded distribution, (iii) private label distribution and(iv) manufacturer/retailer partnerships.Direct Sales to ConsumersConsumers can purchase extended warranties and service contracts directly atwww.warrantysuperstore.com by inputing on-line the relevant data. By purchasingonline the consumer saves typically 30-50% of the normal price charged bytraditional off-line retail dealers. The Company also provides via a third partyfinancing company, at no additional cost to the consumer, an interest freepayment option on the more expensive warranty contracts.Co-Branded DistributionConsumers can purchase the Company's extended warranty and service contractproducts via a corporate partners own web site by clicking on the Company's iconwhich has been put onto the partners web site. This allows the Company to takeadvantage of its partner's brand strength and market positioning. The Company'sstrategic plan identified key market segments where the Company believes thisstrategy will be effective. These include, but are not limited to, Banking,Insurance, Financial Services, Telecommunications, Utilities and Consumer Goodssuppliers. This channel has been developed to provide the Company with a meansof reaching a substantially larger consumer base, without incurring directadvertising expense.Private Label DistributionThis channel represents the next step on from co-branded marketing. Underprivate label distribution the Company provides the corporate partner with theability to supply a complete suite of extended warranty and service contractproducts as if they were their own by embedding the Company's software andproducts on the corporate partners own web site but without the Company'sbranding. For larger corporations already offering a range of branded products,such as in the banking or financial service industries, the ability to add a newrange of value added products that are consistent with the look and feel oftheir established branding is important. Such entities have been increasinglyreluctant to allow click-through partners onto their web sites in the fear oflosing their customer when he moves to purchase a product on a different site.Additionally, the Company's new software allows it to provide its private labelpartners with a very flexible and manageable package, whereby the partner canchose how much of the fulfillment of the extended warranty contract they wish totake. For example, a large insurance company that already had its ownunderwriting capability but does not have a range of extended warranty productscan utilize the Company's products and processing and billing capability tocreate these products under their own label while underwriting the obligationsthemselves as opposed to utilizing the Company's insurance carriers. By enablingprivate label partners to pick and chose from "a complete turnkey solution" toutilizing only a sub-component of the Company's proprietary software, theCompany believes that it can gain access to a much larger portion of theextended warranty/service contract market. 5Manufacture / Retail PartnershipsUtilizing its processing capability, the Company has gained access to a fourthdistribution channel by providing extended warranty/service contracts directlyto consumers through retail and manufacturer partnerships. The Company intendsto develop business relationships with retailers and manufacturers pursuant towhich the Company will enable a product manufacturer or retailer to offeradditional and/or extended warranty coverage over and above their normalSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.manufacturers warranty.DISCONTINUED OPERATIONSThrough April 2001 the Company also operated in the reinsurance market throughStamford. On April 30, 2001 the Company sold Stamford for a total considerationof $372,000. Stamford was chartered under the Laws of, and is licensed toconduct business as an insurance company by the Cayman Islands. AlthoughStamford had incurred losses since its inception, it first generated revenues inthe fourth quarter of 1999. Stamford was a "property and casualty" reinsurancecompany writing reinsurance coverage for one domestic carrier's consumer productservice contracts. In the fourth quarter of 2000, the relationship with thecarrier was terminated. Stamford was not able to obtain additional reinsurancebusiness relationships. In light of the inability of Stamford to write newbusiness and difficulty in forecasting future claim losses in the run off of itsprior reinsurance contract, management decided to sell Stamford. In the sixmonths ended June 30, 2001 the Company recorded a loss of approximately $479,000on the sale which was effective May 1, 2001. The closing and transfer of fundswas completed on July 6, 2001.COMPETITIONThe extended warranty and service contract industry is highly competitive. TheCompany competes with a number of on-line and off-line operators. The Company'scompetitors range from small private companies to major corporations and includeautomobile distributors and retailers of electrical consumer products.INTELLECTUAL PROPERTYWARRANTYSUPERSTORE is a registered trademark in the United States. The Company'sinternet business operates using proprietary software developed in-house.EMPLOYEESAs of December 31, 2001, the Company employed three full-time personnel.RISK FACTORSCORNICHE HAS A HISTORY OF OPERATING LOSSES AND A SUBSTANTIAL ACCUMULATEDEARNINGS DEFICIT AND IT MAY CONTINUE TO INCUR LOSSES.Since its inception in 1980, the Company has generated only limited revenuesfrom sales and has incurred substantial net losses of approximately $2.1million, $2.1 million and $1.2 million for the years ended December 31, 2001,2000 and 1999, respectively. At December 31, 2001, the Company had anaccumulated deficit of approximately $8.5 million. The Company expects to incuradditional operating losses as well as negative cash flow from operations of thewarranty and service contract business. It is anticipated that the Board ofDirectors of the Company, after the consummation of the StrandTek Transaction,will review and consider its alternatives which include the contraction,disposition or termination of such business. There can be no assurance that theCompany will be able to dispose of such business, if a decision to sell is made,on terms favorable to the Company or at all.FUTURE SALES OF CORNICHE'S COMMON STOCK MAY DEPRESS ITS STOCK PRICE.Sales of a substantial number of shares of the Company's Common Stock in thepublic market could cause a reduction in the market price of its Common Stock.The Company had 22,290,710 shares of Common Stock issued and outstanding as ofMarch 12, 2002. As of that date, all of those shares were eligible for saleunder Rule 6144 or are otherwise freely tradable. In addition, 380,500 options and warrantswere outstanding as of March 12, 2002. As of March 12, 2002, 84,000 of thosestock options and warrants were vested and the remainder will vest within thenext five years. The Company also has 681,171 shares of Series A Preferred Stockissued and outstanding as of March 12, 2002, which are convertible, at theoption of the holders or automatically, in certain instances, into 130,989shares of its Common Stock. The Company's Series A Preferred Stock is expectedto be redeemed simultaneously with the closing of the StrandTek Transaction. TheSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Company may also issue additional shares in connection with its business and maygrant additional stock options to its employees, officers, directors andconsultants.In January 2002, Corniche entered into the Agreements which require it toexchange approximately 35,208,000 shares of its Common Stock, approximately626,000 shares of its yet to be created Series D Convertible Preferred Stock,subject to adjustment, and 220,000 shares of Series C Preferred Stock inconnection with the closing of the StrandTek Transaction. In addition, under theterms of the Agreements, the number of shares of Series D Preferred Stockexchanged in the transaction is subject to adjustment based upon the number ofshares of Corniche Common Stock issued and outstanding at the closing, includingthe shares of Common Stock being offered hereunder. Assuming that (i) theprivate placement is concluded at $0.40 per share of Common Stock; (ii) theminimum of 28,875,000 shares of Common Stock offered in the private placementare sold and; (iii) such number of shares satisfies the Financing ConditionAmount, the adjustments to the Series D Preferred Stock would increase thenumber of shares of Series D Preferred Stock to be issued to approximately1,355,000 shares (convertible into approximately 135,500,000 shares of CommonStock) (as adjusted based on the number of issued and outstanding shares ofCommon Stock and based on the lack of authorized shares of Common Stock). Nofurther adjustment would be required for the sale of additional shares in thisprivate placement above the number of shares of Common Stock necessary tosatisfy the Financing Condition Amount. Such shares of Series C and Series DPreferred Stock are convertible into approximately 157,500,000 shares of CommonStock in the aggregate, subject to the satisfaction of certain conditions and tocertain adjustments. In addition, the principal shareholders and thenon-shareholder loan holders of StrandTek are receiving demand registrationrights in connection with the shares of Common Stock and the shares of CommonStock issuable upon the conversion of the Series C and Series D Preferred Stock.RISKS RELATING TO THE STRANDTEK TRANSACTIONCORNICHE WILL BE CHANGING ITS PRINCIPAL BUSINESS AND ITS MANAGEMENT INCONNECTION WITH THE STRANDTEK TRANSACTION.Prior to its proposed acquisition of StrandTek, the Company's business has been(i) the sale of extended warranties and service contracts via the Internet atwww.warrantysuperstore.com and (ii) reinsurance activities, on a limited basis.The reinsurance activities have been sold and terminated in April 2001. Afterthe consummation of the StrandTek Transaction, the Company's business will bethe production and marketing of melt-blown polypropylene for acoustical andthermal insulation applications which is a new business for the Company.Immediately after the consummation of the StrandTek Transaction, the officers,directors and principal shareholders of StrandTek will assume control ofCorniche and the Company's current officers and directors will resign. TheCompany will be relying on the management of StrandTek to operate the businessafter the StrandTek Transaction. StrandTek's management has limited experiencewith managing a public company.CORNICHE WILL HAVE NO RECOURSE AGAINST STRANDTEK AND ITS PRINCIPAL SHAREHOLDERSAND LOAN HOLDERS WHO EXCHANGE THEIR STRANDTEK COMMON STOCK AND LOANS TOSTRANDTEK FOR ITS COMMON STOCK.StrandTek has made certain representations and warranties to the Companyconcerning StrandTek's business, capitalization, and other matters. Theserepresentations and warranties do not survive the closing. After the closing ofthe StrandTek Transaction, the Company has virtually no recourse againstStrandTek and principal shareholders and loan holders who are parties to theStrandTek Transaction if these representations prove to be untrue absent fraud.If these representations and warranties are untrue, the value of its CommonStock may be materially and adversely affected. 7FOLLOWING THE STRANDTEK TRANSACTION, THE PRINCIPAL STOCKHOLDERS OF STRANDTEKWILL HAVE CONTROLLING VOTING POWER.In connection with the acquisition of StrandTek, certain principal stockholderswill receive approximately 35,208,000 shares of the Company's Common Stock andapproximately 626,000 shares of the Company's Series D Preferred Stock, subjectto further adjustment as discussed below. Assuming that (i) the privateSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.placement is concluded at $0.40 per share of Common Stock; (ii) the minimum of28,875,000 shares of Common Stock offered in the private placement are sold and;(iii) such number of shares satisfies the Financing Condition Amount, theadjustments would increase the number of shares of Series D Preferred Stock tobe issued to approximately 1,355,000 (convertible into approximately 135,500,000shares of Common Stock) (as adjusted based on the number of issued andoutstanding shares of Common Stock and based on the lack of authorized shares ofCommon Stock). No further adjustment would be required for the sale ofadditional shares in this private placement above the number of shares of CommonStock necessary to satisfy the Financing Condition Amount. In addition, suchprincipal shareholders and certain non-shareholder loan holders have agreed toexchange certain of their outstanding loans due from StrandTek, in the amount of$22 million in the aggregate, for 220,000 shares of the Company's Series CPreferred Stock. As a result, upon the consummation of the StrandTekTransaction, the principal shareholders and the non-shareholder loan holderswill hold substantially more than a majority of the Company's issued andoutstanding Common Stock and will be in a position to control the actions thatrequire stockholder approval, including: o the election of Corniche's directors; and o the outcome of mergers, sales of assets or other corporate transactions or matters submitted for stockholder approval.It is anticipated that simultaneous with or shortly after the Closing of theStrandTek Transaction at least a majority of the Company's Board of Directorswill be reconstituted with StrandTek board members, including Jerome Bauman,David M. Veltman, Greg Veltman, William G. Buckles, Jr., Philip Palm and KenArsenault.STRANDTEK IS AN EARLY STAGE COMPANY.StrandTek has a limited operating history upon which an evaluation of itsbusiness and its prospects can be based. StrandTek's prospects must beconsidered in light of the risks, expenses and difficulties frequentlyencountered by such companies in the early stage of product launchpost-development, particularly companies in new and rapidly evolving industries.To address these risks and achieve profitability and increased sales levels,StrandTek must, among other things: o establish and increase market acceptance of its products as a replacement for cotton shoddy, fiberglass, polyester fiber and polyether and polyethylene foams as well as other fibrous media; o respond effectively to competitive pressures; o introduce on a timely basis products incorporating its technologies; and o successfully market and support its products.There can be no assurance that StrandTek will achieve or sustain significantsales or profitability in the future.STRANDTEK HAS A HISTORY OF OPERATING LOSSES AND A SUBSTANTIAL ACCUMULATEDEARNINGS DEFICIT AND MAY CONTINUE TO INCUR LOSSES. 8StrandTek has generated only limited revenues from sales and has incurredsubstantial net losses of approximately $16.2 million, $9.7 million, and $5.5million for the years ended September 30, 2001, 2000, and 1999, respectively and$3.8 million for the quarter ended December 31, 2001. At September 30, 2001,StrandTek had an accumulated stockholders' deficit of approximately $22.3million and $26.1 million at December 31, 2001. StrandTek's ability to generaterevenues and achieve profitability and positive cash flows from operations willdepend on increased market acceptance and sales of its products. StrandTek maynot achieve profitability and positive cash flows from operations. There can beno assurance that any prior losses may be used to offset future income, if any,earned by StrandTek.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.STRANDTEK OPERATES IN A BUSINESS WHICH IS HIGHLY COMPETITIVE.As reported by StrandTek, StrandTek faces significant competition in theacoustical and thermal insulation applications business. StrandTek competes withmany established companies, who vary widely in size and expertise. Many of itsexisting and potential competitors in the acoustical and thermal insulationapplications business have far greater financial, marketing, technical andresearch resources, name recognition, distribution channels and market presencethan StrandTek. One significant manufacturer, 3M, produces meltblown acousticmedia for automotive acoustic applications, office panel acoustic applicationsand appliance applications. StrandTek needs to obtain a material market sharefrom such competitors for it to operate profitably.ITEM 2. PROPERTIESThe Company leases approximately 4,100 square feet of office space at 610 SouthIndustrial Boulevard, Euless, Texas at an annual rental of approximately$51,144. The lease expires on July 31, 2002.ITEM 3. LEGAL PROCEEDINGSThe Company is not aware of any material pending legal proceedings or claimsagainst the Company or its subsidiary.ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSNo matters were submitted to a vote of the Company's stockholders during thefourth quarter of 2001. 9 PART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS(a) Market Information. The Company's Common Stock is traded on the OTC Bulletin Board under the symbol "CNGI." The following table sets forth the high and low bid prices of the Company's Common Stock for each full quarterly period within the two most recent fiscal years, as reported by Nasdaq Trading and Market Services. On March 12, 2002, the closing bid price for the Common Stock was $0.45. Information set forth in the table below represents prices between dealers in securities, does not include retail mark-ups, mark-downs, or commissions, and does not necessarily represent actual transactions. 2000 HIGH LOW First Quarter $3.34 $ 2.93 Second Quarter 3.03 1.81 Third Quarter 2.31 1.38 Fourth Quarter 1.81 0.44 2001 HIGH LOW First Quarter $ 0.63 $ 0.22 Second Quarter 0.50 0.19Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Third Quarter 0.82 0.30 Fourth Quarter 0.74 0.35(b) Holders. As of February 26, 2002, there were approximately 1,074 holders of record of the Company's Common Stock.(c) Dividends. Holders of Common Stock are entitled to dividends when, as, and if declared by the Board of Directors out of funds legally available therefore. The Company has not paid any cash dividends on its Common Stock and, for the foreseeable future, intends to retain future earnings, if any, to finance the operations, development and expansion of its business. Future dividend policy is subject to the discretion of the Board of Directors.SERIES A PREFERRED STOCKThe Certificate of Designation for the Company's Series A Preferred Stockprovides that at any time after December 1, 1999 any holder of Series APreferred Stock may require the Company to redeem his shares of Series APreferred Stock (if there are funds with which the Company may legally do so) ata price of $1.00 per share. Notwithstanding the foregoing redemption provisions,if any dividends on the Series A Preferred Stock are past due, no shares ofSeries A Preferred Stock may be redeemed by the Company unless all outstandingshares of Series A Preferred Stock are simultaneously redeemed. The holders ofSeries A Preferred Stock may convert their Series A Preferred Stock into sharesof Common Stock of the Company at a price of $5.20 per share. At December 31,2001, 681,174 shares of Series A Preferred Stock were outstanding. 10On January 29, 2002 notice was given that, pursuant to the Company's RestatedCertificate of Incorporation, as amended (the "Certificate of Incorporation"),the Company has called for redemption and will redeem (the "Redemption") on thedate of the closing of the StrandTek Transaction (the "Redemption Date"), allshares of the Company's Series A Convertible Preferred Stock outstanding on thatdate at a redemption price of $1.05, plus accrued and unpaid dividends from July1, 1995 through and including the Redemption Date of $0.47 per share (the"Redemption Price"). Holders will not be entitled to interest on the RedemptionPrice and the Series A Preferred Stock will cease to accrue dividends on theRedemption Date. The Redemption, among other financial, legal and businessconditions, is a condition precedent to the closing of the StrandTekTransaction, which is expected to close during April 2002. See "Business -Recent Developments". Similarly, completion of the Redemption is subject toclosing the StrandTek Transaction. As a result, Letters of Transmittal inconnection with the redemption will be held in escrow pending the closing of theStrandTek Transaction. Simultaneous with the closing of the StrandTekTransaction, the holders of the Series A Preferred Stock shall receive theRedemption Price. In the event that the StrandTek Transaction is notconsummated, the Company will rescind the Notice of Redemption. Pursuant to theCertificate of Incorporation, each share of Series A Preferred Stock, may beconverted into 0.193 shares of Common Stock at any time prior to the close ofbusiness on the tenth (10) day preceding the Redemption Date.RECENT SALES OF UNREGISTERED SECURITIESOn February 12, 2002 the Company commenced a private placement offering, aslater amended, to sell a minimum of 28,875,000 shares and a maximum of41,125,000 shares of its Common Stock. Only selected investors which qualify as"accredited investors" as defined in Rule 501(a) under the Securities Act of1933, as amended (the "Securities Act"), are eligible to purchase these shares.The shares of Common Stock are being offered to enable the Company to satisfyone of the conditions precedent to consummating the StrandTek Transactiondescribed in "Business - Recent Developments". The shares being offered in theprivate placement have not been registered under the Securities Act and suchinvestors are being granted demand registration rights. The private placement isbeing made pursuant to the exemption provided by Section 4(2) of the SecuritiesAct and certain rules and regulations promulgated under that section. 11Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ITEM 6. SELECTED FINANCIAL DATAThe selected statements of operations and balance sheet data set forth below arederived from audited financial statements of the Company. The information setforth below should be read in conjunction with the Company's auditedconsolidated financial statements and notes thereto. See Item 8 "FinancialStatements and Supplemental Data" and Item 7 "Management's Discussion andAnalysis of Financial Condition and Results of Operations". On February 4, 1999the Company changed its fiscal year-end from March 31 each year to December 31each year. On April 30, 2001 the Company sold Stamford and accordingly theStatement of Operations data presented reflects the Stamford operations asdiscontinued operations as reported in the financial statements of the Company. NINE MONTHS STATEMENT OF OPERATIONS: YEAR ENDED YEAR ENDED YEAR ENDED ENDED YEAR ENDED($'000 EXCEPT NET LOSS PER SHARE WHICH IS DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31,STATED IN $) 2001 2000 1999 1998 1998 Earned Revenues $ 107 $ 27 $ - $ - $ -Direct Costs (70) (33) - - -Gross Profit 37 (6) - - -Operating Loss (1,606) (2,516) (1,023) (344) (222)Loss before discontinued operations andpreferred dividends (1,792) (2,296) (1,084) (403) (204)Net Loss Attributable to Common Stockholders (2,081) (2,075) (1,170) (448) (264)Basic and diluted earnings per share: Loss from continuing operations (0.08) (0.16) (0.16) (0.07) (0.05) Income (loss) from discontinued operations (0.01) 0.02 - - -Net loss attributable to common stockholders (0.09) (0.14) (0.17) (0.07) (0.05)Weighted Average Number of SharesOutstanding 22,284,417 14,902,184 6,905,073 6,367,015 5,166,272BALANCE SHEET DATA: AS OF AS OF AS OF AS OF $'000 DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, 2001 2000 1999 1998 Working Capital $ 1,085 $ 2,079 $ 3,192 $ 541 Total Assets 1,836 3,757 4,905 750 Current Liabilities 489 458 868 138 (Accumulated Deficit) (8,486) (6,405) (4,330) (3,077) Stockholders' Equity 374 2,450 3,112 (308) 12SELECTED QUARTERLY FINANCIAL DATA$'000 QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER(EXCEPT NET LOSS PER SHARE ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDEDWHICH IS STATED IN$) 12/31/01 9/30/01 6/30/01 3/31/01 12/31/00 9/30/00 6/30/00 3/31/00 Earned Revenues $ 42 $ 33 $ 21 $ 11 $ 19 $ (28) $ 34 $ 2Direct Costs 17 31 15 7 10 (13) 27 9Gross profit 25 2 6 4 9 (15) 7 (7)Operating Loss (449) (386) (353) (418) (669) (1,057) (483) (307)Net Loss Attributable to Common Stockholders (725)* (374) (329) (653) (546) (948) (382) (199)Net loss per share (0.03) (0.02) (0.01) (0.03) (0.07) (0.03) (0.03) (0.01)Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.* Includes write-off of unamortized capitalized software. See Management's Discussion and Analysis. 13ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion should be read in conjunction with the auditedconsolidated financial statements and notes thereto, included in Item 8 of thisreport, and is qualified in its entirety by reference thereto.GENERALDuring the first half of fiscal 2001 management became concerned by the slowprogress being made by its warrantysuperstore.com business. As a result,alternative strategies for the Company were evaluated and on January 7, 2002 theCompany entered into the StrandTek Transaction. After the consummation of theStrandTek Transaction, Strandtek will become a majority owned subsidiary of theCompany and the former shareholders of Strandtek will control the Company.Strandtek is a high-tech manufacturer with proprietary technology producingmelt-blown polypropylene for acoustical and thermal insulation applications. Thetransaction is expected to close during April 2002 and is contingent uponcertain closing conditions, including, obtaining financing and a number of otherfinancial, legal and business conditions. There can be no assurance givenhowever that the financing can be satisfied on terms reasonably acceptable tothe parties or that the other financial, legal and business conditions can bemet or that a transaction can be consummated.No decision has been made about the future of the warranty and service contractbusiness. It is anticipated that the Board of Directors will consider thecontraction, sale or termination of the warranty and service contract businessafter the consummation of the StrandTek Transaction. There can be no assurancethat the Company will be able to complete the sale of such business, if adecision to sell is made, on terms favorable to the Company or at all.On April 30, 2001 the Company sold Stamford. The disposition was completed inthe third quarter of 2001, effective as of May 1, 2001. The consolidatedfinancial data relating to Stamford is classified as discontinued operations inthe financial statements of the Company for all periods presented.RESULTS OF CONTINUING OPERATIONSThe Company recognizes revenue from its warranty service contracts business overthe life of contracts executed and direct costs associated with the sale of suchservice contracts are also recognized pro rata over the life of the contracts.FISCAL 2001 COMPARED TO FISCAL 2000The sale of extended warranties and service contracts via the Internet generatedgross revenues of $225,000 in fiscal 2001 as compared to $124,000 in fiscal 2000of which $107,000 were recognized as earned revenues in the year ended December31, 2001 as compared to $27,000 in fiscal 2000. The balance of these revenues isbeing deferred over the life of the contracts. Similarly, direct costsassociated with the sale of service contracts are being recognized pro rata overthe life of the contracts.Selling, general and administrative expenses totaled $1,643,000 during the yearended December 31, 2001 as compared to $2,510,000 for fiscal 2000, a decrease of$867,000 or 34.5%. The decrease is primarily due to a decrease in advertisingcosts ($1,027,000), offset by increases in professional fees ($166,000) andstaff costs ($48,000). The reduction in advertising is due to the Companyfocusing on strategic partnerships and co-op advertising programs as compared toInternet banner ads and media promotions. The increase in professional fees wasdue primarily to legal costs associated with the proposed StrandTek Transactionand the additional staff cost was due to the hiring of a Marketing Manager inthe second half of 2001. 14Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.As a result of the uncertainty over the future of the Company's extendedwarranty and service contract business the Company recorded an impairment chargeof $305,333 in the fourth quarter of 2001. This charge represented theunamortized balance of capitalized software.Interest income decreased by $29,000 for the fiscal year 2001 as compared tofiscal 2000. The decrease is primarily due to lower cash and cash investmentsbalances in 2001 as a result of cash being applied to funding operating losses.Interest expense decreased from $10,000 in the twelve months ended December 31,2000 to $6,000 in fiscal 2001.For the reasons cited above, loss before discontinued operations and preferreddividend for the fiscal year 2001 decreased by 21.9% to $1,792,000 from thecomparable loss of $2,296,000 for fiscal 2000.FISCAL 2000 COMPARED TO FISCAL 1999The Company commenced the sale of its extended warranty/service contractproducts over the Internet in the last quarter of 1999, initially for new andused automobiles. The Company's Internet business recorded gross revenues infiscal 1999 of $11,000 resulting in earned revenues of $400 with the balancedeferred over the life of the related contracts.Selling, general and administrative expenses totaled $2,510,000 during the yearended December 31, 2000 as compared to $1,023,000 for the twelve months endedDecember 31, 1999, an increase of $1,487,000 or 145.4%. The increase isprimarily due to increases in advertising costs ($881,000), staff costs anddirector fees ($191,000), professional fees ($89,000), and depreciation andamortization ($73,000). The increase in advertising expense is due to "Internetbanner advertising" promotions. The increase in payroll costs is primarily dueto the appointment of a Chief Executive Officer in February 1999 and theincrease in professional fees resulted from the Company filing a registrationstatement on Form S-1 to raise additional financing.Interest income totaled $136,000 in fiscal 2000 as compared to $4,400 in thetwelve months ended December 31, 1999. The increase in interest income is due tohigher cash, cash equivalents and investments in fiscal 2000. Interest expensedecreased from $65,000 in the twelve months ended December 31, 1999 to $10,000in fiscal 2000.LIQUIDITY AND CAPITAL RESOURCESThe following chart represents the net funds provided by or used in operating,financing and investment activities for each period as indicated: Twelve Months Ended ------------------- December 31, 2001 December 31, 2000 Cash used inoperating activities $ (373,843) $ (2,327,046)Cash provided by (used in)investing activities 362,939 (25,285)Cash provided by (used in)financing activities (23,432) 1,183,311The Company incurred a net loss attributable to common stockholders of$2,080,714 in fiscal 2001. This loss adjusted for the loss on sale of Stamfordand discontinued operations totaled $1,839,368. Such loss adjusted for non-cashitems such as capitalized software impairment charge $305,333, depreciationcharges $155,436, deferred revenues (net 15of deferred acquisition costs) $38,342, preferred stock dividend accrual $47,684and other non-cash items totaling $4,542 resulted in cash used in operatingactivities totaling $373,483 for the year ended December 31, 2001, net ofSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.working capital movements.To meet its cash requirement during the twelve months ended December 31, 2001the Company relied on the sale of marketable securities ($872,840) and theproceeds from the sale of Stamford ($372,000) to fund the Company's operations.Additionally, the Company generated cash from its Internet business, both earnedand unearned, of approximately $160,000.The Company significantly improved its operating cash flow in fiscal 2001 byreducing its advertising spending from approximately $1,134,000 in fiscal 2000to $107,000 in fiscal 2001 and by focusing on strategic partnerships and co-opadvertising programs to promote its products and services and customerawareness. The Company expended approximately $215,000 for the year endedDecember 31, 2001 to maintain and promote its web site. However, the Company hasno contracted capital expenditure commitments in place.As of December 31, 2001 the Company had cash totaling $51,268. Additionally, ithad Treasury Bills and Federal Home Loan Mortgage notes totaling $1,503,374. TheCompany will continue to rely on its cash reserves and its investments to fundits operations.Subsequent to December 31, 2001 the Company made advances to StrandTek totalling$1,250,000 in advance of completing the StrandTek Transaction. The advances bearinterest at 7% per annum and $1,000,000 of the advances are guaranteed bycertain principal stockholders of StrandTek. Additionally, on February 12, 2002the Company commenced a private placement offering to sell, as amended a minimumof 28,875,000 shares and a maximum of 41,125,000 shares of its Common Stock. Theshares of Common Stock are being offered to enable the Company to satisfy one ofthe conditions precedent to consummating the StrandTek Transaction described in"Item 1 Business - Recent Developments". The shares being offered in the privateplacement have not been registered under the Securities Act but investors arebeing granted demand registration rights.INFLATIONThe Company does not believe that its operations have been materially influencedby inflation in the fiscal year ended December 31, 2001, a situation which isexpected to continue for the foreseeable future.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKNot Applicable.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATAThis information is submitted in a separate section of this Report. See pagesF-1, et. seq.ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSUREThe Company engaged Weinick Sanders Leventhall & Co., LLP ("Weinick") as itsindependent accountants as of August 12, 1998. The Company had not consultedwith Weinick regarding any matters or events set forth in Item 304(a)(2)(i) and(ii) of Regulation S-K.On May 7, 2001, the Company and Weinick terminated their client-auditorrelationship. The reports of Weinick on the financial statements of the Companyfor the prior two fiscal years contained no adverse opinion or 16disclaimer of opinion and were not qualified or modified as to uncertainty,audit scope or accounting principles. The Company's Audit Committee and itsBoard of Directors participated in and approved the decision to change theCompany's independent accountants. In connection with its audits for the priortwo fiscal years and through May 7, 2001, there were no disagreements withWeinick on any matter of accounting principles or practices, financial statementdisclosure or auditing scope or procedure, which disagreements, if not resolvedto the satisfaction of Weinick, would have caused Weinick to make referenceSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.thereto in its report on the financial statements for such years. During theprior two fiscal years and through May 7, 2001 there were no "reportable events"as describe under Item 304(a)(1)(v) of Regulation S-K.The Company engaged Travis, Wolff & Company, LLP ("Travis Wolff") as its newindependent accountants as of May 7, 2001. Such appointment was approved by theCompany's Audit Committee and its Board of Directors. During the two most recentfiscal years and through May 7, 2001 the Company had not consulted with TravisWolff regarding any matters or events set forth in Item 304(a)(2)(i) and (ii) ofRegulation S-K. 17 PART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANTThe following table sets forth certain information regarding the directors andexecutive officers of the Company as of March 12, 2002:NAME AGE POSITION---- --- -------- James J. Fyfe(1) 47 Chairman of the Board of DirectorsRobert F. Benoit(2) 44 Director and Chief Executive OfficerRobert H. Hutchins 73 DirectorDavid H. Boltz 49 Vice President, Chief Information OfficerPaul L. Harrison(1)(2) 40 DirectorJoseph P. Raftery(1)(2) 58 Director================================================================================ (1) Member of the Compensation Committee (2) Member of the Audit CommitteeJames J. FyfeChairman of the Board of DirectorsMr. Fyfe has served as a director of the Company since May 1995. He becameChairman of the Board in April 2000. From May 1995 until May 1998, Mr. Fyfeserved as Vice President and Chief Operating Officer of the Company. Mr. Fyfehas been a director of Machine Vision Holdings, Inc., an intelligent automationand control software technology company, since January 1998 and of TransmediaAsia Pacific, Inc., a member benefit loyalty marketing company, since October1999. From August 1996 to August 1997, Mr. Fyfe was an outside director ofMedical Laser Technologies, Inc.Robert F. BenoitDirector and Chief Executive OfficerMr. Benoit has served as Chief Executive Officer of the Company since September1999 and Secretary since June 1999. He was Executive Vice President and ChiefOperating Officer from February 1999 to September 1999. From May 1996 toFebruary 1999, Mr. Benoit was a business analyst at Warrantech Automotive, Inc.,a service contract provider, in Euless, Texas, where he served as project leaderfor Internet applications. From October 1995 to May 1996, Mr. Benoit served asthe corporate accounting manager responsible for the non-bank subsidiaries ofShawmut Bank, National Association.Robert H. HutchinsDirectorMr. Hutchins has served as director and the President and Principal FinancialOfficer of the Company since May 1998. Effective December 31, 2000 Mr. Hutchinsretired as President and Principal Financial Officer. Mr. Hutchins was employedby Warrantech Automotive, Inc. as National Claims Manager, from May 1995 to May1998. Prior to joining Warrantech, he spent 45 years in the property andcasualty reinsurance industry in various executive and management positions.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 18David H. Boltz, PHDVice President and Chief Information OfficerMr. Boltz has served as Vice President, Chief Information Officer of theCompany since June 2000. From May 1991 to June 2000, Dr. Boltz was anindependent business consultant operating as Language Engineering Services,where he was engaged in providing business technology consulting services andinformation management services to numerous firms in the Dallas/Ft. Worthmetroplex.Paul L. HarrisonDirectorMr. Harrison was elected as a director of the Company in June 2000. He has beena director of Transmedia Europe, Inc., a "member-benefit" loyalty marketingcompany, since June 1996. Mr. Harrison was also President, Principal Financialand Accounting Officer and Secretary of Transmedia Asia Pacific, Inc., also a"member-benefit" loyalty marketing company, until October 1999. From May 1994until June 1997, he was a business and financial consultant to TransmediaEurope, Inc.Joseph P. RafteryDirectorMr. Raftery was elected as a director of the Company in June 2000. He has beenan independent business consultant since 1998. From 1990 to 1998, Mr. Rafterywas Chairman and a member of the Board of Directors and President of BankAmericaInsurance Group, Inc., a subsidiary of BankAmerica Corp. based in San Diego,California.SECTION 16 BENEFICIAL OWNERSHIP COMPLIANCESection 16(a) of the Securities Exchange Act of 1934 requires the Company'sdirectors and officers, and persons who own more than 10% of a registered classof the Company's equity securities, to file initial reports of ownership andreports of changes in ownership with the Securities and Exchange Commission.These persons are required by the Securities and Exchange Commission to furnishthe Company with copies of all Section 16(a) reports that they file. Basedsolely on the Company's review of these reports and written representationsfurnished to the Company, management believes that in 2001 each of the reportingpersons compiled with these filing requirements. 19ITEM 11. EXECUTIVE COMPENSATIONThe following table sets forth the aggregate compensation paid during the threeyears ended December 31, 2001 to the Company's Chief Executive Officer. No otherexecutive officer of the Company earned in excess of $100,000 for servicesrendered during fiscal 2001. SUMMARY COMPENSATION TABLE ANNUAL LONG-TERM OTHER COMPENSATION COMPENSATION COMPENSATION NAME AND PRINCIPAL POSITION NOTES FISCAL SALARY OPTIONS/SAR'S ALL OTHER YEAR COMPENSATION Robert F. Benoit (1)(2) 2001 $109,960 -- $ 6,000 Chief Executive Officer 2000 96,154 75,000 5,800Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (Appointed March 1, 2000) 1999 62,019 125,000 4,000Notes: (1) All other compensation comprises monthly automobile allowances. (2) Fiscal 1999 relates to the period from February 15, 1999, when Mr. Benoit first joined the Company to December 31, 1999.OPTIONS/SAR GRANTS IN LAST FISCAL YEARNone.AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS/VALUESThe following table sets forth information as of December 31, 2001 concerningexercisable and non-exercisable options held by the Company's Chief ExecutiveOfficer and any other executive officer of the Company earning in excess of$100,000 for services rendered during fiscal 2001. The table includes the valueof "in-the-money" options which represents the spread between the exercise priceof the existing stock options and the year end price of the Common Stock whichwas $0.41. SHARES NUMBER OF SECURITIES ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN- ON VALUE OPTIONS AT THE-MONEY OPTIONS AT EXERCISE REALIZED FISCAL YEAR END (#) FISCAL YEAR END ($)NAME (#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE Robert F. Benoit 0 0 43,750/131,250 0/0 20EMPLOYMENT AGREEMENTS(1) On February 15, 2000, and as amended on May 8, 2001, Mr. Benoit and the Company entered into an employment agreement for a term ending on February 15, 2003 ("Employment Agreement") with the Company. The Employment Agreement provides for a salary of $100,000 per annum and an annual auto allowance of $6,000 per annum. In addition, Mr. Benoit is entitled to participation in the Company's health care and dental plans and all other employee benefit plans. Pursuant to the terms of the Employment Agreement, Mr. Benoit was granted non-qualified options to purchase 75,000 shares of Common Stock at an exercise price of $1.097 per share and 100,000 shares of Common Stock at an exercise price of $1.00 per share. Such options vest over a three-year period commencing June 1, 2000. The Employment Agreement also provides for the acceleration of vesting of such options in the event of a change in control of the Company. Additionally, upon a change in control Mr. Benoit has the option, exercisable in writing within 30 days after the effective date of the change in control, to terminate the Employment Agreement and to receive as a severance payment an amount equal to 18 months base salary and require the Company to pay the cost of continuing medical insurance for the severance period. The Employment Agreement includes confidentiality and non-compete restrictions during the term of the Employment Agreement and for a period of two years thereafter. Mr. Benoit may be discharged for cause including failure or refusal to perform his duties, dishonesty, conviction of a felony or fraud, material breach of any provision of the Employment Agreement, disability or death.(2) On June 26, 2000 Mr. Boltz and the Company entered into an employment agreement for a term ending on June 26, 2003 ("Employment Agreement") with the Company. The Employment Agreement provides for a salary of $75,000 per annum. In addition, Mr. Boltz is entitled to participationSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. in the Company's health care and dental plans and all other employee benefit plans. The Employment Agreement includes confidentiality and non-compete restrictions during the term of the Employment Agreement and for a period of two years thereafter. Mr. Boltz may be discharged for cause including failure or refusal to perform his duties, dishonesty, conviction of a felony or fraud, material breach of any provision of the Employment Agreement, disability or death. The Employment Agreement also provides for a grant of non-qualified options to purchase 100,000 shares of Common Stock at an exercise price of $1.94. Such options vest over a three-year period commencing June 26, 2001 with the vesting of such options accelerating upon a change in control of the Company. Additionally, upon a change in control Mr. Boltz has the option, exercisable in writing within 30 days after the effective date of the change in control, to terminate the Employment Agreement and to receive as a severance payment an amount equal to 18 months base salary and require the Company to pay the cost of continuing medical insurance for the severance period.STOCK OPTION PLANSIn April 1992 the Company adopted the 1992 Stock Option Plan to provide for thegranting of options to directors. According to the terms of the plan, eachdirector is granted options to purchase 1,500 shares of Common Stock each year.The maximum number of options to purchase shares of Common Stock that may begranted under this plan is 20,000 shares. 21In May 1998, the Company adopted the 1998 Employee Incentive Stock Option Plan("1998 Plan"). The 1998 Plan was established to attract and retain high caliberpersonnel and to offer an incentive for officers and employees to promote thebusiness of the Company. Officers, employees and other independent contractorswho perform services for the Company or any of its subsidiaries are eligible toreceive incentive stock options under the 1998 Plan. The maximum aggregatenumber of shares that may be issued under options is 300,000 shares of CommonStock, subject to adjustment in the event of stock splits, stock dividends,recapitalizations, mergers, reorganizations, exchanges of shares and othersimilar changes affecting the Company's Common Stock. Unless terminated earlier,the 1998 Plan expires in May 2008. The aggregate fair market value (determinedat the time the option is granted) of the shares for which incentive stockoptions are exercisable for the first time under the terms of the 1998 Plan byany eligible employee during any calendar year cannot exceed $100,000. Optionsare exercisable at the fair market value of the common stock on the date ofgrant and have five-year terms. The exercise price of each option is 100% of thefair market value of the underlying stock on the date the options are granted,except that no option will be granted to any employee who, at the time theoption is granted, owns stock possessing more than 10% of the total combinedvoting power of all classes of stock of the Company or any subsidiary unless (a)at the time the options are granted, the option exercise price is at least 110%of the fair market value of the shares of common stock subject to the optionsand (b) the option by its terms is not exercisable after the expiration of fiveyears from the date such option is granted. The Board of Directors' CompensationCommittee administers the 1998 Plan. As of March 31, 2002 300,000 options havebeen granted under the 1998 Plan.DIRECTOR COMPENSATIONPursuant to the 1998 Independent director Compensation Plan, each director whois not an officer or employee of the Company is entitled to receive compensationof $2,500 per calendar quarter plus 500 shares of common stock per calendarquarter of board service, in addition to reimbursement of travel expenses.Outside directors are entitled to be compensated for committee service at $500per calendar quarter plus 125 shares of common stock per calendar quarter.All directors are entitled to receive options to purchase 1,500 shares of commonstock each May under the Company's 1992 Stock Option Plan for Directors. TheCompany deferred the grant of such options that otherwise would have beengranted in May 1999, 2000 and 2001. 22Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTThe following table sets forth information as to the number of shares of CommonStock beneficially owned, as of March 12, 2002, by (i) each beneficial owner ofmore than five percent of the outstanding Common Stock, (ii) each current namedexecutive officer and director and (iii) all current executive officers anddirectors of the Company as a group. All shares are owned both beneficially andof record unless otherwise indicated. Unless otherwise indicated, the address ofeach beneficial owner is c/o Corniche Group Incorporated, 610 South IndustrialBoulevard Suite 220, Euless, Texas 76040. NUMBER AND PERCENTAGE OF SHARES OF COMMON STOCK OWNED PERCENTAGE OF COMMON STOCK # OF SHARES BENEFICIALLY OWNED (SEENAME AND ADDRESS OF BENEFICIAL OWNER NOTES BENEFICIALLY OWNED NOTE 1) Pictet & Cie NomineesCie 29 Blvd. 2,670,000 11.98%Georges Favon 1204Geneva SwitzerlandJoel San Antonio56 North Stanwich Road 3,752,500 16.83%Greenwich, CT 06831James J. Fyfe (2) 109,500 0.49%Robert F. Benoit (3) 76,750 0.34%Robert H. Hutchins (4) 152,000 0.68%David H. Boltz (5) 50,000 0.22%Paul L. Harrison 4,250 0.02%Joseph P. Raftery 4,250 0.02%All current directors and officers as agroup (six persons) 396,750 1.77% 23Notes:(1) Based on 22,290,710 shares of common stock outstanding on March 12, 2002.(2) Includes currently exercisable options to purchase 1,500 shares of Common Stock at $0.40625 per share.(3) Includes currently exercisable options to purchase 33,750 shares of Common Stock at $1.097 per share and 25,000 shares of Common Stock at $1.00 per share.(4) Includes 150,000 shares of Common Stock held by Mr. Hutchins as co-trustee for a living trust, with Mr. and Mrs. Hutchins as the beneficiaries.(5) Includes currently exercisable options to purchase 50,000 shares of Common Stock at $1.94 per shareITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSIn May 1998, the Company issued 765,000 shares of Series B Preferred Stock toSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.certain of the Company's executive officers and directors in exchange for$76,500 in cash and issued 10,000 shares of Series B Preferred Stock to James J.Fyfe a director of the Company in consideration for services rendered to theCompany.In September 1998, the Company purchased Stamford from Warrantech Corporation("Warrantech") for $37,000 in cash. Joel San Antonio, then Acting Chairman ofthe Board of Directors of the Company and a principal stockholder of theCompany, is also a significant stockholder and Chief Executive Officer,President and Chairman of the Board of Directors of Warrantech Corporation.Through November 2001 Warrantech also acted as claims administrator for theCompany's extended warranty and service contracts business and was paidadministrative fees of $48,506 and $29,611 in fiscal 2001 and 2000 respectively.No administrative fees were paid in fiscal 1999.In addition, during fiscal 1998 the Company paid Warrantech approximately$42,000 for reimbursement of expenses incurred in connection with thepreliminary development of the Company's Web site. 24 PART IVITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KThe following documents are being filed as part of this Report:(a)(1) Financial Statements: Corniche Group Incorporated See "Index to Financial Statements" contained in Part II, Item 8(a)(3) Exhibits: 3 (a) Certificate of Incorporation filed September 18, 1980(1) 3 (b) Amendment to Certificate filed September 29, 1980(1) 3 (c) Amendment to Certificate of Incorporation filed July 28, 1983(2) 3(b) (d) Amendment to Certificate of Incorporation filed February 10, 1984(2) 3(d) (e) Amendment to Certificate of Incorporation filed March 31, 1986(3) 3(e) (f) Amendment to Certificate of Incorporation filed March 23, 1987(4) 3(g) (g) Amendment to Certificate of Incorporation filed June 12, 1990(5) 3.8 (h) Amendment to Certificate of Incorporation filed September 27, 1991(6) 3.9 (i) Certificate of Designation filed November 12, 1994(7) 3.8 (j) Amendment to Certificate of Incorporation filed September 28, 1995(9) 3(j) (k) Certificate of Designation for the Series B Preferred Stock dated May 18, 1998 C3(f) (l) By-laws of the Corporation, as amended on April 25, 1991(6) (m) Amendment to Certificate of Incorporation dated May 18, 1998 A4 (a) Form of Underwriter's Warrant(6) 4.9.1 (b) Form of Promissory Note - 1996 Offering(9) 4(b) (c) Form of Promissory Note - 1997 Offering(9) 4(c) (d) Form of Common Stock Purchase Warrant - 1996 Offering(9) 4(d) (e) Form of Common Stock Purchase Warrant - 1997 Offering(9) 4(e)10 (a) 1986 Stock Option Plan, as amended(7) 10.6 (b) 1992 Stock Option Plan(8) B (c) Stock Purchase Agreement, dated as of March 4, 1998, between the Company and the Initial Purchasers named therein(9) B (d) 1998 Employees Stock Option Plan(9) D (e) Stock Contribution Exchange Agreement with StrandTek International, Inc. dated January 7, 2002, as amended on February 11, 2002(10) 10(o) (f) Supplemental Disclosure Agreement to Stock Contribution Exchange Agreement with StrandTek International, Inc. dated January 7, 2002(10) 10(p)Notes:(1) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-18, File No. 2-69627, which exhibit is incorporated here by reference.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 25(2) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 2-88712, which exhibit is incorporated here by reference.(3) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 33-4458, which exhibit is incorporated here by reference.(4) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1987, which exhibit is incorporated here by reference.(5) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-3, File No. 33-42154, which exhibit is incorporated here by reference.(6) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-1, File No. 33-42154, which exhibit is incorporated here by reference.(7) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1994, which exhibit is incorporated here by reference.(8) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated March 30, 1992, which exhibit is incorporated here by reference.(9) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated April 23, 1998, which exhibit is incorporated here by reference.(10) Filed herewith.REPORTS ON FORM 8-K No reports on Form 8-K were filed by the Company during the fourthquarter of fiscal 2001. 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the SecuritiesExchange Act of 1934, the Company has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized. CORNICHE GROUP INCORPORATED By: /s/ Robert F. Benoit -------------------- Robert F. Benoit, Chief Executive Office Pursuant to the requirements of the Securities Exchange Act of 1934, asamended, this report has been signed below by the following persons on behalf ofthe Company and in the capacities and on the dates indicated:Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Signatures Title Date---------- ----- ---- /s/ Robert F. Benoit Director and Chief Executive Officer April 9, 2002------------------------------------ (Principal executive officer)ROBERT F. BENOIT /s/ James J. Fyfe Chairman of the Board and Director April 9, 2002------------------------------------JAMES J. FYFE/s/ Paul L. Harrison Director April 9, 2002------------------------------------PAUL L. HARRISON/s/ Joseph P. Raftery Director April 9, 2002------------------------------------JOSEPH P. RAFTERY/s/ Robert H. Hutchins Director April 9, 2002------------------------------------ROBERT H. HUTCHINS 27 CORNICHE GROUP INCORPORATED Table of Contents================================================================================ Report of Independent Certified Public Accountants - Travis, Wolff & Company, LLP F-2 Independent Auditors' Report - Weinick Sanders Leventhal & Co., LLP F-3 Financial Statements: Consolidated Balance Sheets at December 31, 2001 and 2000 F-4 Consolidated Statements of Operations For the Years Ended December 31, 2001, 2000 and 1999 F-5 Consolidated Statement of Stockholders' Equity For the Years Ended December 31, 2001, 2000 and 1999 F-6 Consolidated Statements of Cash Flows For the Years Ended December 31, 2001, 2000, and 1999 F-7 Notes to Consolidated Financial Statements F-8 to F-25 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors of Corniche Group Incorporated Euless, Texas We have audited the accompanying consolidated balance sheet of Corniche Group Incorporated (the "Company") as of December 31, 2001 and the related consolidated statements of operations, stockholders' equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Corniche Group Incorporated as of December 31, 2001 and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming Corniche Group Incorporated will continue as a going concern. As discussed in the accompanying financial statements, the Company sold its insurance subsidiary in July 2001. Additionally, the Company temporarily discontinued sales of its extended warranty service contracts through its web site in December 2001. As more fully disclosed in Note 13 to the financial statements, the Company has entered into an agreement to acquire StrandTek International, Inc. The acquisition is conditioned on among other things, the private placement of shares of Company stock for approximately $11.55 million. There can be no assurances that the private placement will be successful or that the acquisition will be completed. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 13. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ TRAVIS WOLFF & COMPANY, LLP Dallas, Texas February 1, 2002 (except for Note 13, as to which the date is February 19, 2002) F-2 INDEPENDENT AUDITORS' REPORT To the Stockholders and Board of Directors Corniche Group Incorporated We have audited the accompanying consolidated balance sheet of Corniche Group Incorporated and Subsidiary as at December 31, 2000, and the related consolidated statements of operations, redeemable preferred stock, common stock, other stockholders' equity and accumulated deficit, and cash flows for the years ended December 31, 2000 and 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonableSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Corniche Group Incorporated and Subsidiary as at December 31, 2000, and the results of their operations and their cash flows for the years ended December 31, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ WEINICK SANDERS LEVENTHAL & CO., LLP New York, New York February 8, 2001 F-3 CORNICHE GROUP INCORPORATED Consolidated Balance Sheets-------------------------------------------------------------------------------- December 31, ------------------------------ 2001 2000 ------------ ------------ ASSETSCURRENT ASSETS: Cash and cash equivalents $ 51,268 $ 85,604 Marketable securities 1,503,374 2,376,214 Prepaid expenses and other current assets 19,734 75,291 ------------ ------------ Total current assets 1,574,376 2,537,109PROPERTY AND EQUIPMENT, NET 74,159 525,866DEFERRED ACQUISITION COSTS 183,579 76,950NET ASSETS OF SUBSIDIARY -- 613,344OTHER ASSETS 4,175 4,175 ------------ ------------ $ 1,836,289 $ 3,757,444 ============ ============LIABILITIES AND STOCKHOLDERS' EQUITYCURRENT LIABILITIES: Dividends payable - preferred stock $ 337,827 $ 290,143 Accounts payable, accrued expenses and other current liabilities 130,617 144,823 Current portion of long-term debt 21,051 23,459 ------------ ------------ Total current liabilities 489,495 458,425UNEARNED REVENUES 259,779 114,808LONG-TERM DEBT 32,108 53,132Series A Convertible Preferred Stock: $0.07 cumulative convertible preferred stock; liquidation value, $1.00 per share; authorized, 1,000,000 shares; outstanding, 681,174 shares 681,174 681,174STOCKHOLDERS' EQUITY: Preferred stock; authorized, 5,000,000 shares Series B convertible redeemable preferred stock, liquidation value, 10 shares Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. of common stock per share, $.01 par value; authorized, 825,000 shares; outstanding, 20,000 shares 200 200 Common stock, $.001 par value; authorized, 75,000,000 shares; issued and outstanding, 22,290,710 shares at December 31, 2001 and 22,280,210 shares at December 31, 2000 22,291 22,280 Additional paid-in capital 8,837,687 8,833,156 Accumulated deficit (8,486,445) (6,405,731) ------------ ------------ Total stockholders' equity 373,733 2,449,905 ------------ ------------ $ 1,836,289 $ 3,757,444 ============ ============ The accompanying notes are an integral part of the consolidated financial statements. F-4 CORNICHE GROUP INCORPORATED Consolidated Statements of Operations-------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------------ 2001 2000 1999 ------------ ------------ ------------ Earned revenues $ 107,447 $ 27,175 $ 398Direct costs 70,674 33,339 445 ------------ ------------ ------------GROSS PROFIT 36,773 (6,164) (47)Selling, general and administrative expenses 1,642,874 2,510,492 1,022,560 ------------ ------------ ------------OPERATING LOSS (1,606,101) (2,516,656) (1,022,607)OTHER INCOME (EXPENSE): Unrealized gain on marketable securities 18,779 37,710 -- Realized gain on marketable securities -- 56,307 -- Capitalized software impairment charge (305,333) -- -- Interest income 107,183 136,353 4,431 Interest expense (6,212) (10,136) (65,326) ------------ ------------ ------------ (185,583) 220,234 (60,895) ------------ ------------ ------------LOSS BEFORE DISCONTINUED OPERATIONS AND PREFERRED DIVIDEND (1,791,684) (2,296,422) (1,083,502)DISCONTINUED OPERATIONS: Income (loss) from operations 237,898 269,257 (28,834) Loss on disposal (479,244) -- -- ------------ ------------ ------------ (241,346) 269,257 (28,834) ------------ ------------ ------------NET LOSS (2,033,030) (2,027,165) (1,112,336)PREFERRED DIVIDEND (47,684) (48,211) (57,172) ------------ ------------ ------------NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (2,080,714) $ (2,075,376) $ (1,169,508) ============ ============ ============Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.BASIC EARNINGS PER SHARE Loss before discontinued operations $ (0.08) $ (0.16) $ (0.17) Income (loss) from discontinued operations (0.01) 0.02 -- ------------ ------------ ------------Net loss attributable to common stockholders $ (0.09) $ (0.14) $ (0.17) ============ ============ ============Weighted average common shares outstanding 22,284,417 14,902,184 6,905,073 ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements. F-5 CORNICHE GROUP INCORPORATED Consolidated Statement of Stockholders' Equity Years Ended December 31, 2001, 2000 and 1999-------------------------------------------------------------------------------- Series B Convertible Preferred Stock Common Stock -------------------- --------------------- Additional Accumulated Shares Amount Shares Amount Paid-in Capital Deficit Total --------- -------- ----------- -------- --------------- ----------- ----------- BALANCE AT DECEMBER 31, 1998 825,000 $ 8,250 6,370,058 $ 6,370 2,838,420 $(3,160,847) $ (307,807) Issuance of common stock for interest and services rendered -- -- 55,000 55 57,664 -- 57,719 Issuance of common stock for indebtness -- -- 208,738 209 252,973 -- 253,182 Issuance of common stock for cash, net of offering costs -- -- 5,875,835 5,876 4,248,360 -- 4,254,236 Conversion of Series A convertible preferred stock into common stock -- -- 3,586 3 24,527 -- 24,530 Series A convertible stock dividends (57,172) (57,172) Net loss -- -- -- -- -- (1,112,336) (1,112,336) --------- -------- ----------- -------- --------------- ----------- -----------BALANCE AT DECEMBER 31, 1999 825,000 8,250 12,513,217 12,513 7,421,944 (4,330,355) 3,112,352 Issuance of common stock for cash net of offering costs -- -- 1,676,250 1,676 1,205,094 -- 1,206,770 Issuance of common stock for services -- -- 16,000 16 28,194 -- 28,210 Conversion of Series B convertible preferred stock into common stock (805,000) (8,050) 8,050,000 8,050 -- -- -- Conversion of Series A convertible -- preferred stock into common stock -- -- 24,743 25 175,257 -- 175,282 Compensatory effect of stock options -- -- -- -- 2,667 -- 2,667 Series A convertible stock dividends -- -- -- -- -- (48,211) (48,211) Net loss -- -- -- -- -- (2,027,165) (2,027,165) --------- -------- ----------- -------- --------------- ----------- -----------BALANCE AT DECEMBER 31, 2000 20,000 200 22,280,210 22,280 8,833,156 (6,405,731) 2,449,905 Issuance of common stock to directors -- -- 10,500 11 4,531 -- 4,542 Series A convertible stock dividends -- -- -- -- -- (47,684) (47,684) Net loss -- -- -- -- -- (2,033,030) (2,033,030) --------- -------- ----------- -------- --------------- ----------- -----------BALANCE AT DECEMBER 31, 2001 20,000 $ 200 22,290,710 $ 22,291 $ 8,837,687 $(8,486,445) $ 373,733 ========= ======== =========== ======== =============== =========== =========== The accompanying notes are an integral part of the consolidated financial statements. F-6 CORNICHE GROUP INCORPORATED Consolidated Statements of Cash Flows------------------------------------------------------------------------------- Years Ended December 31, ------------------------------------------ 2001 2000 1999Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. ------------ ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (2,033,030) $ (2,027,165) $ (1,112,336) Adjustments to reconcile net loss to net cash used in operating activities: Net income (loss) from discontinued operations (237,898) (269,257) 28,834 Loss on sale of subsidiary 479,244 -- -- Capitalized software impairment charge 305,333 -- -- Common shares and Series B preferred shares issued for interest expense and for services rendered 4,542 30,877 57,719 Depreciation 155,436 154,421 81,118 Unearned revenues 144,971 104,093 10,715 Deferred acquisition costs (106,629) (70,572) (6,378) Changes in operating assets and liabilities: Marketable securities 872,840 169,071 (2,105,144) Prepaid expenses and other current assets 55,557 (3,669) (71,620) Other assets -- 8,350 -- Accounts payable, accrued expenses and other current liabilities (14,209) (423,195) 446,822 ------------ ------------ ------------ Net cash used in operating activities (373,843) (2,327,046) (2,670,270) ------------ ------------ ------------CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of property and equipment (9,061) (25,285) (464,442) Proceeds from sale of subsidiary 372,000 -- -- ------------ ------------ ------------ Net cash provided by (used in) investment activities 362,939 (25,285) (464,442) ------------ ------------ ------------CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of capital stock -- 1,206,770 4,254,236 Net proceeds from long-term debt -- -- 89,264 Repayment of long-term debt (23,432) (23,459) (4,671) ------------ ------------ ------------ Net cash (used in) provided by financing activities (23,432) 1,183,311 4,338,829 ------------ ------------ ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (34,336) (1,169,020) 1,204,117 Cash and cash equivalents at beginning of year 85,604 1,254,624 50,507 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 51,268 $ 85,604 $ 1,254,624 ============ ============ ============SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the period for: Income taxes $ -- $ -- $ -- ============ ============ ============ Interest $ 6,212 $ 10,136 $ 38,443 ============ ============ ============SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Issuance of preferred stock and common stock for services rendered $ 4,542 $ 28,210 $ 30,000 ============ ============ ============ Compensatory element of stock options $ -- $ 2,667 $ -- ============ ============ ============ Net accrual of dividends on Series A preferred stock $ 47,684 $ 48,211 $ 57,172 ============ ============ ============ Series A preferred stock and dividends thereon converted to common stock and additional paid-in capital upon conversion $ -- $ 175,282 $ 24,530 ============ ============ ============ Issuance of common stock for indebtedness $ -- $ -- $ 253,182 ============ ============ ============ Issuance of common stock for interest $ -- $ -- $ 27,719 ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements. F-7 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 1 - THE COMPANYCorniche Group Incorporated (hereinafter referred to as the "Company" or "CGI")was incorporated in Delaware on September 18, 1980 under the name FideltyMedical Services, Inc. From its inception through March 1995, the Company wasSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.engaged in the development, design, assembly, marketing, and sale of medicalimaging products. As a result of a reverse merger with Corniche DistributionLimited and its Subsidiaries ("Corniche") the Company was engaged in the retailsale and wholesale distribution of stationery products and related officeproducts, including office furniture, in the United Kingdom. Effective March 25,1995, the Company sold its wholly-owned medical imaging products subsidiary. OnSeptember 28, 1995 the Company changed its name to Corniche Group Incorporated.In February 1996, the Company's United Kingdom operations were placed inreceivership by their creditors. Thereafter, through May 1998, the Company hadno activity. On March 4, 1998, the Company entered into a Stock PurchaseAgreement ("Agreement"), approved by the Company's stockholders on May 18, 1998,with certain individuals (the "Initial Purchasers") whereby the InitialPurchasers acquired an aggregate of 765,000 shares of a newly created Series BConvertible Redeemable Preferred Stock, par value $0.01 per share. Thereafterthe Initial Purchasers endeavored to establish for the Company new businessoperations in the property and casualty specialty insurance and the servicecontract markets. On September 30, 1998, the Company acquired all of the capitalstock of Stamford Insurance Company, Ltd. ("Stamford") from WarrantechCorporation ("Warrantech") for $37,000 in cash in a transaction accounted for asa purchase. On April 30, 2001, the Company sold Stamford for a consideration of$372,000. During 2001 the Company recorded a loss of approximately $479,000 onthe sale of Stamford. The closing was effective May 1, 2001 and transfer offunds was completed on July 6, 2001. F-8 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 1 - THE COMPANY - (CONTINUED)At April 30, 2001 and December 31, 2000, Stamford's total net assets consistedof the following: April 30, December 31, ----------- ------------ 2001 2000 ----------- ------------ ASSETS: Cash and equivalents $ 836,979 $ 387,402 Restricted cash 493,451 817,265 Accounts receivable -- 160,757 Deferred acquisition costs 56,074 92,871 Licenses, net of accumulated Amortization 15,150 15,557 ----------- ------------ 1,401,654 1,473,852 ----------- ------------LIABILITIES: Current liabilities 24,572 5,222 Loss reserve 77,247 112,318 Unearned premiums 448,592 742,968 ----------- ------------ 550,411 860,508 ----------- ------------Net assets $ 851,243 $ 613,344 =========== ============Cash and restricted cash of $1,072,431 and $923,405 were on deposit in a UnitedStates domestic bank at April 30, 2001 and December 31, 2000, respectively.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(a) Basis of consolidation: The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany amounts and balances have been eliminated in consolidation.(b) Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.(c) Cash Equivalents: Short-term cash investments, which have a maturity of ninety days or less when purchased, are considered cash equivalents in the statement of cash flows. F-9 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)(d) Concentrations of Credit-Risk: Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and marketable securities. The Company places its domestic operations cash accounts with high credit quality financial institutions, which at times may be in excess of the FDIC insurance limit. The Company's marketable securities are primarily comprised of investments in U. S. Treasury Bills and Federal Home Loan Mortgage notes.(d) Marketable Securities: Marketable securities are classified as trading securities and are reported at market value. At December 31, 2001, marketable securities are comprised of U.S. Treasury Bills and Federal Home Loan Mortgage notes whose cost approximated their market value. At December 31, 2000, marketable securities were comprised of state and local municipal bonds whose cost approximated their market value.(e) Property and Equipment: The cost of property and equipment is depreciated over the estimated useful lives of the related assets of 3 to 5 years. The cost of computer software programs is amortized over their estimated useful lives of five years. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to income as incurred.(f) Income Taxes: The Company adopted SFAS 109, "Accounting for Income Taxes", which recognizes (a) the amount of taxes payable or refundable for the current year and, (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an enterprise's financial statement or tax returns.(g) Accounting for Long-Lived Assets: The Company adopted Statement of Financial Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". The statement requires that the Company recognizes and measures impairment losses of long-lived assets, certain identifiable intangibles, the value of long-lived assets to be disposed of and long-term liabilities. At December 31, 2001 the Company recognized as impaired, the book value of certain capitalized software costs resulting in an impairment charge of $305,333.(h) Advertising Costs: The Company expenses advertising costs as incurred. Advertising costs amounted to $107,117, $1,133,987 and $252,983 for the years ended December 31 2001, 2000 and 1999, respectively.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. F-10 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)(i) Earnings Per Share: The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated by dividing net income available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share, which is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding, is not presented as it is anti-dilutive in all periods.(k) Recently Issued Accounting Pronouncements: In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations", which eliminates the pooling method of accounting for business combinations initiated after June 30, 2001. In addition, SFAS 141 addresses the accounting for intangible assets and goodwill acquired in a business combination. This portion of SFAS 141 is effective for business combinations completed after June 30, 2001. The Company does not expect SFAS 141 to have a material effect on the Company's financial position or results of operations. In July 2001, the FASB issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Intangible Assets", which revises the accounting for purchased goodwill and intangible assets. Under SFAS 142, goodwill and intangible assets with indefinite lives will no longer be amortized, but will be tested for impairment annually, and also in the event of an impairment indicator. SFAS 142 is effective for fiscal years beginning after December 15, 2001. The Company does not expect the adoption of SFAS 142 to have a material effect on the financial statements. The Company will adopt SFAS 142 on January 1, 2002. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the Impairment or Disposal of Long-lived Assets", which revises the accounting for long-lived assets and superceded SFAS 121. The Company will be required to implement SFAS 144 on January 1, 2002. The Company has not yet determined the impact of this implementation on its financial statements. F-11 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED)(l) Revenue Recognition: Stamford's reinsurance premiums are recognized on a pro rata basis over the policy term. The deferred policy acquisition costs are the net cost of acquiring new and renewal insurance contracts. These costs are charged to expense in proportion to net premium revenue recognized. The provisions for losses and loss-adjustment expenses include an amount determined from loss reportsSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. on individual cases and an amount based on past experience for losses incurred but not reported. Such liabilities are necessarily based on estimates, and while management believes that the amount is adequate, the ultimate liability may be in excess of or less than the amounts provided. The methods for making such estimates and for establishing the resulting liability are continually reviewed, and any adjustments are reflected in earnings currently. The Company sells via the Internet through partnerships and directly to consumers, extended warranty service contracts for seven major consumer products or stores. The Company recognizes revenue ratably over the length of the contract. The Company purchases insurance to fully cover any losses under the service contracts from a domestic carrier. The insurance premium and other costs related to the sale are amortized over the life of the contract.NOTE 3 - PROPERTY AND EQUIPMENTProperty and equipment consists of the following: December 31, ------------------------- 2001 2000 ---------- ---------- Computer equipment $ 131,014 $ 124,690Furniture and fixtures 23,829 23,829Equipment under capital lease 17,806 17,806Computer software 602,014 599,277 ---------- ---------- 774,663 765,602Less: Accumulated depreciation 700,504 239,736 ---------- ---------- $ 74,159 $ 525,866 ========== ==========Depreciation and amortization charged to operations were $155,436, $154,421 and$81,118 for the years ended December 31, 2001, 2000, and 1999, respectively. F-12 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 4 - ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIESAccounts payable, accrued expenses and other current liabilities are as follows: December 31, ------------------------- 2001 2000 ---------- ---------- Accrued professional fees $ 83,014 $ 75,824Director fees 12,500 8,500Other 6,250 29,521Payroll related 13,853 24,277Travel & entertainment 15,000 6,701 ---------- ----------Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. $ 130,617 $ 144,823 ========== ==========NOTE 5 - NOTES PAYABLEIn October 1999, the Company sold to accredited investors 10 units of itspromissory notes and common stock for $25,025 each. Each unit was comprised of a5% interest bearing $25,000 note and 25,000 shares. The variance between thefair market value of the 25,000 common shares issued in the aggregate of $27,969and the cash received of $250 was deemed to be additional interest and wascharged to operations over the life of the notes. The notes were repaid in fullby December 31, 1999. At December 31, 1999, accrued interest on the notes of$3,025 remained outstanding and was repaid in January, 2000. The effectiveweighted average interest rate of the notes during the period they wereoutstanding was 49.2%.NOTE 6 - LONG-TERM DEBTLong-term debt consists of the following: December 31, ------------------------- 2001 2000 ---------- ---------- Capital lease obligations $ 343 $ 4,591Bank note payable in equal monthly installments of$2,043 including interest at 8.75%, collateralized bycomputer equipment having an undepreciated cost of$47,665 52,816 72,000 ---------- ---------- 53,159 76,591Current maturities 21,051 23,459 ---------- ---------- $ 32,108 $ 53,132 ========== ========== F-13 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 6 - LONG-TERM DEBT - (CONTINUED)The aggregate scheduled future maturities of the obligations are as follows: Years Ending December 31, -------------- 2002 $ 21,051 2003 22,595 2004 9,513 -------- $ 53,159 ========Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.NOTE 7 - SERIES A CONVERTIBLE PREFERRED STOCKIn connection with the settlement of a securities class action litigation in1994, the Company issued 1,000,000 shares of Series A $0.07 ConvertiblePreferred Stock (the "Series A Preferred Stock") with an aggregate value of$1,000,000. The following summarizes the terms of SeriesA Preferred Stock as more fully set forth in the Certificate of Designation. TheSeries A Preferred Stock has a liquidation value of $1 per share, is non-votingand convertible into common stock of the Company at a price of $5.20 per share.Holders of Series A Preferred Stock are entitled to receive cumulative cashdividends of $0.07 per share, per year, payable semi-annually. Until November30, 1999 the Series A Preferred Stock was callable by the Company at a price of$1.04 per share, plus accrued and unpaid dividends, and thereafter at a price of$1.05 per share, plus accrued and unpaid dividends. In addition, if the closingprice of the Company's common stock exceeds $13.80 per share for a period of 20consecutive trade days, the Series A Preferred Stock is callable by the Companyat a price equal to $0.01 per share, plus accrued and unpaid dividends.The Certificate of Designation for the Series A Preferred Stock also states thatat any time after December 1, 1999 the holders of the Series A Preferred Stocksmay require the Company to redeem their shares of Series A Preferred Stock (ifthere are funds with which the Company may do so) at a price of $1.00 per share.Notwithstanding any of the foregoing redemption provisions, if any dividends onthe Series A Preferred Stock are past due, no shares of Series A Preferred Stockmay be redeemed by the Company unless all outstanding shares of Series APreferred Stock are simultaneously redeemed. During the years ended December 31,2000 and 1999, 128,880 and 18,711, respectively, shares of Series A PreferredStock were converted into 24,743 and 3,586, respectively, shares of commonstock. At December 31, 2001, 681,174 shares of Series A Preferred Stock wereoutstanding, and accrued dividends on these outstanding shares were $337,827.See Note 13 - Subsequent Events F-14 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 8 - STOCKHOLDERS' EQUITY(a) Series B Convertible Redeemable Preferred Stock: On March 4, 1998, the Company entered into a Stock Purchase Agreement ("Agreement"), approved by the Company's stockholders on May 18, 1998, with certain individuals (the "Initial Purchasers") whereby the Initial Purchasers and two other persons acquired an aggregate of 825,000 shares of a newly created Series B Convertible Redeemable Preferred Stock ("Series B Stock"), par value $0.01 per share. Pursuant to the Agreement and subsequent transactions, the Initial Purchasers acquired 765,000 shares of Series B Stock for $76,500 in cash. The Company incurred certain legal expenses of the Initial Purchasers equaling approximately $50,000 in connection with the transaction. In addition, the Company issued 50,000 shares of Series B Stock to a consultant as compensation valued at $5,000 for his assistance to the Company in the identification and review of business opportunities and this transaction and for his assistance in bringing the transaction to fruition. Additionally, the Company issued 10,000 shares of Series B Stock to James Fyfe as compensation valued at $1,000 for his work in bringing this transaction to fruition. These issuances diluted the voting rights of the then existing stockholders by approximately 57%. The total authorized shares of Series B Convertible Redeemable Preferred Stock is 825,000. The following summarizes the terms of the Series B Stock whose terms are more fully set forth in the Certificate of Designation. The Series B Stock carries a zero coupon and each share of the Series B Stock is convertible into ten shares of the Company's common stock. The holder of a share of the Series B Stock is entitledSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. to ten times any dividends paid on the common stock and such stock has ten votes per share and votes as one class with the common stock. The holder of any share of Series B Convertible Redeemable Preferred Stock has the right, at such holder's option (but not if such share is called for redemption), exercisable on or after September 30, 2000, to convert such share into ten (10) fully paid and non-assessable shares of common stock (the "Conversion Rate"). The Conversion Rate is subject to adjustment as stipulated in the Agreement. Upon liquidation, the Series B Stock would be junior to the Company's Series A Preferred Stock and would share ratably with the common stock with respect to liquidating distributions. During the year ended December 31, 2000, holders of 805,000 shares of the Series B Preferred Stock converted their shares into 8,050,000 shares of the Company's common stock. At December 31, 2001 and 2000, 20,000 Series B Preferred Shares were issued and outstanding. The Company's right to repurchase or redeem shares of Series B Stock was eliminated in fiscal 1999 pursuant to the terms of the Agreement and the Certificate of Designation.(b) Common Stock: At the 2000 annual meeting, the stockholders approved an amendment increasing the authorized common stock to 75 million shares from 30 million shares. Commencing in May 1999 through July 1999, the Company sold 688,335 shares of its common stock to accredited investors for $538,492, net of offering costs. In December 1999, accredited F-15 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 8 - STOCKHOLDERS' EQUITY - (CONTINUED)(b) Common Stock - Continued investors purchased 5,187,500 shares of the Company's common stock for $3,715,744, net of offering costs. From January 1, 2000 through February 15, 2000, additional investors acquired 1,676,250 shares of the Company's common stock for approximately $1,206,000, net of offering costs. The Company in 1999 issued 5,000 shares of its common stock whose fair value was $5,000 to its President as a signing bonus that was charged to operations at the time of issuance. The Company also issued in 1999, 25,000 shares of its common stock whose fair value was $25,000 at the date of issuance to a public relations consultant for future services. The arrangement with the consultant was terminated in 1999 and the fair value of the shares was charged to operations in 1999. The Company in 2000 issued 3,000 shares of its common stock whose fair value was $7,688 to a consultant for promotional activities. The Company also issued 13,000 shares of its common stock whose fair value was $20,522 to its past and present board members for director's fees from the second quarter of 1998 through the fourth quarter of 2000. See Note 13 - Subsequent Events.(c) Warrants: The Company has issued common stock purchase warrants from time to time to investors in private placements, certain vendors, underwriters, and directors and officers of the Company. A total of 101,308 shares of common stock were reserved for issuance upon exercise of warrants as of December 31, 1998. Of these outstanding warrants, warrants for 9,375 common shares at $46.40 per share expired in April 1999. The remaining warrants to acquire 91,933 common shares at exercise prices ranging from $3.20 to $8.10 per share were granted in March 1995 to certain directors, officers and employees who converted previously outstanding stock options under the 1986 Plan into warrants on substantially the same terms as the previously held stock options, except the warrants were immediately vested. During fiscal 1999, warrants to acquire 22,308Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. common shares at prices ranging from $3.90 to $46.40 per share expired. No warrants were exercised during any of the periods presented. A total of 79,000 shares of common stock are reserved for issuance upon exercise of outstanding warrants as of December 31, 2001 at prices ranging from $3.20 to $27.50 and expiring through October 2004.(d) Stock Option Plans: The 1998 Employee Incentive Stock Option Plan provides for the grant of options to purchase shares of the Company's common stock to employees. Under the 1998 Plan, the maximum aggregate number of shares that may be issued under options is 300,000 shares of common stock. The aggregate fair market value (determined at the time the option is granted) of the shares for which incentive stock options are exercisable for the first time under the terms of the 1998 Plan by any eligible employee during any calendar year cannot F-16 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 8 - STOCKHOLDERS' EQUITY - (CONTINUED)(d) Stock Option Plans - Continued exceed $100,000. Options are exercisable at the fair market value of the common stock on the date of grant and have five-year terms. The exercise price of each option is 100% of the fair market value of the underlying stock on the date the options are granted, except that no option will be granted to any employee who, at the time the option is granted, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any subsidiary unless (a) at the time the options are granted, the option exercise price is at least 110% of the fair market value of the shares of common stock subject to the options and (b) the option by its terms is not exercisable after the expiration of five years from the date such option is granted. The Board of Directors' Compensation Committee administers the 1998 Plan. In April 1992, the Company adopted the 1992 Stock Option Plan to provide for the granting of options to directors. According to the terms of this plan, each director is granted options to purchase 1,500 shares each year. The maximum amount of the Company's common stock that may be granted under this plan is 20,000 shares. In 1999, an option to acquire 100,000 common shares at $1.00 per share was granted to an officer and an option to acquire 25,000 common shares at $0.6875 per share was issued to a consultant under the 1998 Plan. In fiscal 2000, options to acquire 75,000 common shares at $1.097 per share, 100,000 common shares at $1.88 per share and 100,000 common shares at $1.94 per share were granted to officers. In Fiscal 2001, options to acquire 75,000 and 100,000 common shares at $0.37 and $1.88, respectively, were cancelled. F-17 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial StatementsSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.================================================================================NOTE 8 - STOCKHOLDERS' EQUITY - (CONTINUED)(d) Stock Option Plans: (continued) Stock option activity under the 1992 and 1998 Stock Option Plans is asfollows: Weighted Average Number of Shares Exercise Price ---------------- ---------------- Balances at December 31, 1998 $ 3,000 $ 0.36Granted 125,000 0.94Cancelled -- -- ---------------- ----------------Balances at December 31, 1999 128,000 0.92Granted 275,000 1.69Cancelled -- -- ---------------- ----------------Balances at December 31, 2000 403,000 1.45Granted 75,000 0.37Expired (1,500) 0.31Cancelled (175,000) 1.23 ---------------- ----------------Balances at December 31, 2001 301,500 $ 1.30 ================ ================The following table summarizes information about stock options outstanding atDecember 31, 2001: Shares Outstanding Weighted Average Range of and Exercisable at Remaining Life Weight Average Exercise Prices December 31, 2001 (Years) Exercise Price--------------------------- ------------------ ---------------- -------------- $ 0.31 to $ 0.69 26,500 3.21 $ 0.65$ 1.00 to $ 1.94 275,000 8.18 1.37 --------- ------ ------Total 301,500 7.72 $ 1.30 ========= ====== ====== F-18 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 8 - STOCKHOLDERS' EQUITY - (CONTINUED)(d) Stock Option Plans: (continued)Outstanding options expire 90 days after termination of the holder's status asemployee or director. All options were granted at an exercise price equal to thefair value of the common stock at the grant date. Therefore, in accordance withthe provisions of APB Opinion No. 25 related to fixed stock options, noSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.compensation expense is recognized with respect to options granted or exercised.Under the alternative fair-value based method defined in SFAS No. 123, the fairvalue of all fixed stock options on the grant date would be recognized asexpense over the vesting period. Financial Accounting Standards BoardInterpretation No. 44 is an interpretation of APB Opinion No. 25 and SFAS No.123 which requires that effective July 1, 2000, all options issued tonon-employees after January 12, 2000 be accounted for under the rules of SFASNo. 123. Options granted to non-employees after December 15, 1998 throughJanuary 12, 2000 are also required to follow SFAS No. 123 prospectively fromJuly 1, 2000. The effect of adoption of the Interpretation was a charge tooperations in 2000 of $2,667 and an increase in additional paid in capital inthe same amount.Assuming the fair market value of the stock at the date of grant to be $.3125per share in May 1996, $.40625 per share in May 1997, $.6875 in January 1999 and$1.00 per share in September 1999, and $1.097 to $1.94 in June 2000, the life ofthe options to be from three to ten years, the expected volatility at 200%,expected dividends are none, and the risk-free interest rate of 10%, the Companywould have recorded compensation expense of $59,129, $57,842 and $7,750,respectively, for the years ended December 31, 2001, 2000 and 1999 as calculatedby the Black-Scholes option pricing model.As such, proforma net loss and net loss per share attributable to commonstockholders would be as follows: 2001 2000 1999 ------------ ------------ ------------ Net loss attributable to common stockholders:As reported $ (2,080,714) $ (2,075,376) $ (1,169,508)Additional compensation (59,129) (57,842) (7,750) ------------ ------------ ------------As adjusted $ (2,139,843) $ (2,133,218) $ (1,177,258) ============ ============ ============Net loss per share attributable to common stockholders:As reported $ (0.09) $ (0.14) $ (0.17) ============ ============ ============As adjusted $ (0.10) $ (0.14) $ (0.17) ============ ============ ============ F-19 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 9 - INCOME TAXESDeferred tax assets consisted of the following as of December 31: 2001 2000 1999 ------------ ------------ ------------ Net operating loss carryforwards $ 1,828,000 $ 1,416,000 $ 721,000Property and equipment 126,000 48,000 --Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Capital loss carryforward 166,000 -- --Deferred revenue 88,000 -- --Other, net -- 14,000 -- ------------ ------------ ------------Net deferred tax assets 2,208,000 1,517,000 721,000Deferred tax asset valuation allowance (2,208,000) (1,517,000) (721,000) ------------ ------------ ------------ $ -- $ -- $ -- ============ ============ ============The provision for income taxes is different than the amount computed using theapplicable statutory federal income tax rate with the difference for each yearsummarized below: 2001 2000 1999 -------- --------- -------- Federal tax benefit at statutory rate (34.0)% (34.0)% (34.00)%Change in valuation allowance 33.0% 34.0% 34.0%Permanent difference 1.0% -- -- -------- --------- --------Provision for income taxes 0.00% 0.00% 0.00% ======== ========= ========The Tax Reform Act of 1986 enacted a complex set of rules limiting theutilization of net operating loss carryforwards to offset future taxable incomefollowing a corporate ownership change. The Company's ability to utilize its NOLcarryforwards is limited following a change in ownership in excess of fiftypercentage points during any three-year period.Upon receipt of the proceeds from the last foreign purchasers of the Company'scommon stock in January 2000, common stock ownership changed in excess of 50%during the three-year period then ended. The utilization of the Company's netoperating loss carryforwards at December 31, 2001 of approximately $5,370,000has been limited by this ownership change. The future tax benefit of the netoperating loss carryforwards aggregating approximately $1,800,000 at December31, 2001 has been fully reserved as it is not more likely than not that theCompany will be able to use the operating loss in the future. F-20 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 10 - COMMITMENTS, CONTINGENCIES AND OTHER(a) Leases: Rent expense charged to operations for the year ended December 31, 2001 was $51,144 and for 2000 and 1999 was $50,100 in each year. Future minimum annual rent commitments under operating leases expiring in July 2002, amounts to $30,443.(b) Investment Contract: The Company has terminated, effective January 1, 2001 its investment advisory agreement with AIG Global Investment Corporation ("AIG") under which AIG functioned as investment advisor and manager of all the Company's investment assets. The Company entered into an agreement with Bank One National Safekeeping Services Capital Markets effective January 17, 2001 to maintain its investment accounts, which consisted of Treasury Notes and Federal Home Loan Mortgages.NOTE 11 - SEGMENT INFORMATIONSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Until April 30, 2001, the Company operated in two segments; as a reinsuror andas a seller of extended warranty service contracts through the Internet. Thereinsurance segment has been discontinued with the sale of Stamford (see Note1), and the Company now operates in one segment.NOTE 12 - RELATED PARTY TRANSACTIONS The Company processes claims on its warranty contracts through WarrantechCorporation (Warrantech), in which a principal shareholder of the Company isalso a significant shareholder and Chief Executive Officer, President andChairman of the Board of Directors. Warrantech receives an administration fee of$50 per contract for processing the claim. Total administrative fees paid toWarrantech in 2001 and 2000 totaled $48,506 and $29,611, respectively. Therewere no administrative fees paid in 1999. F-21 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 13 - SUBSEQUENT EVENTS (a) StrandTek Transaction On January 7, 2002, the Company entered into a Stock Contribution Exchange Agreement (the "Exchange Agreement") and a Supplemental Disclosure Agreement (together with the Exchange Agreement, the "Agreements") with Strandtek International, Inc., a Delaware corporation ("Strandtek"), certain of Strandtek's principal shareholders and certain non-shareholder loan holders of Strandtek (the "StrandTek Transaction"). The Exchange Agreement was amended on February 11, 2002. Strandtek is a high-tech manufacturer with proprietary technology producing melt-blown polypropylene for acoustical and thermal insulation applications. After the consummation of the transactions contemplated by the Agreements, Strandtek will become a majority owned subsidiary of the Company and the former shareholders of Strandtek will control the Company. Pursuant to the terms of the Agreements, as amended, the Company will acquire approximately 178,000,000 shares or approximately 98% of the common stock, $.0001 par value per share, of Strandtek from certain principal shareholders of Strandtek. Such principal shareholders will exchange their shares of Strandtek common stock for approximately 34,650,000 shares of the Company's Common Stock and approximately 750,000 shares of the Company's Series D Convertible Preferred Stock, as adjusted pursuant to the Agreements and subject to further adjustments currently being negotiated. In addition, such principal shareholders and certain non-shareholder loan holders have agreed to exchange certain of their outstanding loans due from Strandtek, in the amount of $22 million in the aggregate, and the Company will issue 220,000 shares of its Series C 7% Convertible Preferred Stock. Upon the consummation of the transaction contemplated by the Agreements, the principal shareholders and the non-shareholder loan holders will own more than a majority of the outstanding shares and voting power of the Company. In addition, in January 2002 the Company advanced to Strandtek a loan of $1 million on an unsecured basis, which is personally guaranteed by certain of the principal shareholders of Strandtek and a further loan of $250,000 on February 19, 2002 on an unsecured basis. Such loans are due on the earlier of March 31, 2002 or forty five days after termination of the agreements. F-22Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 13 - SUBSEQUENT EVENTS - (CONTINUED)(a) StrandTek Transaction - continued The transaction is expected to close during April 2002 and is contingent upon certain closing conditions, including, obtaining financing of approximately $11 million and a number of other financial, legal and business conditions. The Company is attempting to secure this financing through an unregistered private placement of its securities. Upon the closing of the transaction, Jerome Bauman, President of Strandtek, will be appointed Chairman and Chief Executive Officer of the Company and William Buckles, Chief Financial Officer of Strandtek, will be appointed Chief Financial Officer, Treasurer and Secretary and Ronald Basar will be appointed Vice President of the Company. There can be no assurance given at this time that the financing can be satisfied on terms reasonably acceptable to the parties or that the other financial, legal and business conditions can be met or that a transaction can be consummated. The following summarizes the terms of the Series C 7% Convertible Preferred Stock. The Series C Preferred Stock shall rank senior to the Company's Series D Preferred Stock and Common Stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up. Commencing July 1, 2002, the holders of shares of Series C Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Company, cumulative dividends at the rate of $7.00 per share of Series C Preferred Stock, subject to appropriate adjustment. The holder of any share of Series C Preferred Stock shall have the right, at such holder's option, to convert each share of the Series C Preferred Stock into one hundred shares of the Company's Common Stock, plus additional shares for accrued and unpaid dividends, subject to certain adjustments. The following summarizes the terms of the Series D Preferred Stock. The Series D Preferred Stock shall rank junior to the Company's Series C 7% Convertible Preferred Stock with respect to the payment of dividends and to the distribution of assets upon liquidation, dissolution or winding up, and pari passu with the Common Stock. So long as any shares of the Series D Preferred Stock are outstanding, no dividend shall be declared or paid upon the Common Stock or upon any other stock ranking junior to, or on a parity with, the Series D Preferred Stock. The holder of any share of Series D Preferred Stock shall have the right, at such holder's option, to convert each share of the Series D Preferred Stock into one hundred shares of the Company's Common Stock, subject to certain adjustments. The holders of shares of the Series C Preferred Stock and Series D Preferred Stock shall have the same voting rights as the holder of that number of shares of Common Stock into which a share of Series C or Series D Preferred Stock could be converted. F-23 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 13 - SUBSEQUENT EVENTS - (CONTINUED)(a) StrandTek Transaction - continuedSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The Company and Strandtek anticipate that the contribution and exchange of stock and cash for capital stock of the Company shall constitute a nontaxable transfer of property and the transaction is contingent upon Strandtek receiving a tax opinion to that effect. The securities being exchanged in the transaction have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States without the effectiveness of a resale registration statement or an applicable exemption from the registration requirements. The principal shareholders and the non-shareholder loan holders shall be entitled to demand registration rights for the Common Stock issued to them and the Common Stock issuable upon the conversion of the Series C and Series D Preferred Stock.(b) Private Placement On February 12, 2002 the Company commenced a private placement offering to sell a minimum of 16,500,000 shares and a maximum of 23,500,000 shares of its Common Stock. Only selected investors which qualify as "accredited investors" as defined in Rule 501(a) under the Securities Act of 1933, as amended (the "Securities Act"), are eligible to purchase these shares. The shares of Common Stock are being offered to enable the Company to satisfy one of the conditions precedent to consummating the StrandTek Transaction described in (a) above. The shares being offered in the private placement have not been registered under the Securities Act and the private placement is being made pursuant to the exemption provided by Section 4(2) of the Securities Act and certain rules and regulations promulgated under that section.(c) Redemption of Series A Preferred Shares On January 29, 2002 notice was given that, pursuant to the Company's Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"), the Company has called for redemption and will redeem (the "Redemption") on the date of the closing of the StrandTek Transaction (the "Redemption Date"), all shares of the Company's Series A Convertible Preferred Stock outstanding on that date at a redemption price of $1.05, plus accrued and unpaid dividends from July 1, 1995 through and including the Redemption Date of $0.47 per share (the "Redemption Price"). Holders will not be entitled to interest on the Redemption Price and the Series A Preferred Stock will cease to accrue dividends on the Redemption Date. The Redemption, among other financial, legal and business conditions, is a condition precedent to the closing of the StrandTek Transaction, which is expected to close during March 2002. See (a) above. Similarly, completion of the Redemption is subject to closing the StrandTek Transaction. F-24 CORNICHE GROUP INCORPORATED Notes to the Consolidated Financial Statements================================================================================NOTE 13 - SUBSEQUENT EVENTS - (CONTINUED)(c) Redemption of Series A Preferred Shares - continued As a result, Letters of Transmittal in connection with the redemption will be held in escrow pending the closing of the StrandTek Transaction. Simultaneous with the closing of the StrandTek Transaction, the holders of the Series A Preferred Stock shall receive the Redemption Price. In the event that the StrandTek Transaction is not consummated, the Company will rescind the Notice of Redemption. Pursuant to the Certificate of Incorporation, each share of Series A Preferred Stock, may be converted into 0.193 shares of Common Stock at any time prior to the close of business on the tenth (10) day preceding the Redemption Date.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. F-25 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION---------- ----------- 3 (a) Certificate of Incorporation filed September 18, 1980(1) 3 (b) Amendment to Certificate filed September 29, 1980(1) 3 (c) Amendment to Certificate of Incorporation filed July 28, 1983(2) 3(b) (d) Amendment to Certificate of Incorporation filed February 10, 1984(2) 3(d) (e) Amendment to Certificate of Incorporation filed March 31, 1986(3) 3(e) (f) Amendment to Certificate of Incorporation filed March 23, 1987(4) 3(g) (g) Amendment to Certificate of Incorporation filed June 12, 1990(5) 3.8 (h) Amendment to Certificate of Incorporation filed September 27, 1991(6) 3.9 (i) Certificate of Designation filed November 12, 1994(7) 3.8 (j) Amendment to Certificate of Incorporation filed September 28, 1995(9) 3(j) (k) Certificate of Designation for the Series B Preferred Stock dated May 18, 1998 C3(f) (l) By-laws of the Corporation, as amended on April 25, 1991(6) (m) Amendment to Certificate of Incorporation dated May 18, 1998 A4 (a) Form of Underwriter's Warrant(6) 4.9.1 (b) Form of Promissory Note - 1996 Offering(9) 4(b) (c) Form of Promissory Note - 1997 Offering(9) 4(c) (d) Form of Common Stock Purchase Warrant - 1996 Offering(9) 4(d) (e) Form of Common Stock Purchase Warrant - 1997 Offering(9) 4(e)10 (a) 1986 Stock Option Plan, as amended(7) 10.6 (b) 1992 Stock Option Plan(8) B (c) Stock Purchase Agreement, dated as of March 4, 1998, between the Company and the Initial Purchasers named therein(9) B (d) 1998 Employees Stock Option Plan(9) D (e) Stock Contribution Exchange Agreement with Strandtek International, Inc. dated January 7, 2002, as amended on February 11, 2002(10) 10(o) (f) Supplemental Disclosure Agreement to Stock Contribution Exchange Agreement with Strandtek International, Inc. dated January 7, 2002(10) 10(p)Notes:(1) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-18, File No. 2-69627, which exhibit is incorporated here by reference.(2) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 2-88712, which exhibit is incorporated here by reference.(3) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-2, File No. 33-4458, which exhibit is incorporated here by reference.(4) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1987, which exhibit is incorporated here by reference.(5) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-3, File No. 33-42154, which exhibit is incorporated here by reference.(6) Filed with the Securities and Exchange Commission as an exhibit, numbered as indicated above, to the Company's registration statement on Form S-1, File No. 33-42154, which exhibit is incorporated here by reference.(7) Filed with the Securities and Exchange Commission as an exhibit,Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. numbered as indicated above, to the Company's annual report on Form 10-K for the year ended September 30, 1994, which exhibit is incorporated here by reference.(8) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated March 30, 1992, which exhibit is incorporated here by reference.(9) Filed with the Securities and Exchange Commission as an exhibit, as indicated above, to the Company's proxy statement dated April 23, 1998, which exhibit is incorporated here by reference.(10) Filed herewith.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 10(e) STOCK CONTRIBUTION EXCHANGE AGREEMENT This Stock Contribution Exchange Agreement (this "Agreement") is madeand entered into as of the 7th day of January, 2002, by and among Corniche GroupIncorporated, a Delaware corporation ("Corniche"), Strandtek International,Inc., a Delaware corporation ("Strandtek"), and Jerome Bauman, Jan Arnett,William G. Buckles, Jr., Phil Palm, David Veltman, Greg Veltman, Sheila Duffy,Craig Babcock, Ray Juska, Ron Basar and Mike Barody (collectively, the"Principal Shareholders"), and Preston Whaley and Clifford Chapman(collectively, the "Non-shareholder Loan Holders"). PRELIMINARY STATEMENTS A. Corniche desires to acquire control of the business operated byStrandtek through the acquisition of substantially all of the common stock ofStrandtek, and the Principal Shareholders, Non-shareholder Loan Holders, andCash Investors (as hereinafter defined) desire to acquire control of Cornichethrough the transactions contemplated and referenced in this Agreement. ThePrincipal Shareholders own approximately 97% of the outstanding capital stock ofStrandtek. The Principal Shareholders and the Non-shareholder Loan Holders(collectively the "Investor Loan Holders") own all of the Non-Institutional DebtSecurities owed by Strandtek ("Investor Loans"). Upon satisfaction of theconditions hereinafter specified, the Principal Shareholders have agreed toexchange their Strandtek capital stock for Corniche Common Stock and CornicheSeries D Preferred Stock, as more fully provided herein, and the Investor LoanHolders have agreed to exchange the principal amount of, their Investor Loansfor Corniche Series C Preferred Stock, as more fully provided herein. Strandtekthereby would become a majority owned subsidiary of Corniche, as more fullyprovided herein, and upon the simultaneous closing of the Private PlacementTransaction (as hereinafter defined) the Principal Shareholders, Non-shareholderLoan Holders and Cash Investors (as hereinafter defined) would control Corniche. B. The Board of Directors of Strandtek has determined that thisAgreement is consistent with and in furtherance of the long-term businessstrategy of Strandtek and that it is in the best interests of all of the holdersof shares of Strandtek's capital stock. C. The respective Boards of Directors of Corniche and Strandtek havedetermined that this Agreement, structured in the manner contemplated herein, isdesirable and in the best interests of their respective shareholders and, byresolutions duly adopted, have approved and adopted this Agreement. D. The Parties intend that the contribution and exchange of stock andcash for capital stock of Corniche by the Principal Shareholders,Non-shareholder Loan Holders and Cash Investors shall constitute a nontaxabletransfer of property pursuant to Section 351 of the Internal Revenue Code of1986, as amended (the "Code") and that the stock for stock exchange describedabove shall constitute a "reorganization" within the meaning of Section 368(a)of the Code. NOW, THEREFORE, in consideration of the mutual covenants hereincontained, the parties hereto (collectively, the "Parties" and each a "Party")hereby adopt this Agreement as and for a plan (the "Plan") under Section 368(a) of the Code, and in order to implement thePlan, the Parties hereby represent, warrant, covenant and agree as follows: ARTICLE I DEFINITIONS 1.1 Specific Definitions. For purposes of this Agreement, the followingterms shall have the following meanings: "Affiliate" shall mean, with respect to any entity (the "SubjectSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Entity"), any Person which controls, is controlled by, or is under commoncontrol with, the Subject Entity. "Cash Investors" shall mean those entities and/or individuals providingfinancing to Corniche pursuant to the Private Placement Transaction. "Combined Material Adverse Effect" shall mean a material adverse effecton the business, operations, assets or financial condition of Corniche and itsSubsidiaries (including Strandtek), taken as a whole. "Corniche Common Stock" shall mean the common stock, par value $0.001per share, of Corniche. "Corniche Disclosure Schedule" shall mean the schedule of disclosuresseparately delivered by Corniche to Strandtek simultaneously with the executionand delivery of this Agreement and the Supplemental Disclosure Agreement. "Corniche Material Adverse Effect" shall mean a material adverse effecton the business, operations, assets or financial condition of Corniche and itsSubsidiaries (excluding Strandtek), taken as a whole, provided, however, that(x) in no event shall any effect that results from (a) the public announcementor pendency of the transactions contemplated hereby or any actions taken incompliance with this Agreement, or (b) changes affecting the United Stateseconomy generally constitute a Corniche Material Adverse Effect and (y) adecrease in the market price of Corniche Common Stock will not constitute aCorniche Material Adverse Effect (except with respect to an effect which,independent of such decrease, would constitute an Corniche Material AdverseEffect). "Corniche Series C Preferred Stock" shall mean the Series C 7%Convertible Preferred Stock, par value $0.01 per share, of Corniche, consistingof 220,000 shares, carrying "as-if-converted" voting rights with the CornicheCommon Stock and a cumulative dividend of 7% per annum times the liquidationpreference hereinafter specified, with each share of Series C Preferred Stockbeing convertible at the holders' option into 100 shares of Corniche CommonStock (i.e., the liquidation preference of $100 hereinafter established dividedby a conversion price of $1.00 per share (the "Conversion Price")), and whichshall be automatically converted on the same terms if the Market Price (asdefined in the Certificate of Designation therefor) of the Corniche Common Stockis equal to or higher than two times the Conversion Price for 20 consecutiveTrading Days (as defined in the Certificate of Designation therefor); provided,however, in any such event the other conditions contained in the Certificate ofDesignation annexed hereto as Appendix 1.1 to any such conversion -2-are satisfied, with a liquidation preference of $100 per share and otherwisecontaining the terms set forth in the Certificate of Designation annexed heretoas Appendix 1.1. "Corniche Series D Preferred Stock" shall mean the Series D ConvertiblePreferred Stock, par value $0.01 per share, of Corniche, consisting of 640,000shares, carrying participating dividends and "as-if-converted" voting rightswith the Corniche Common Stock as specified in the Certificate of Designationannexed hereto as Appendix 1.2 (the "Series D Designation"), convertible at theholder's option following satisfaction of certain conditions specified in theSeries D Designation into Corniche Common Stock at the ratio of 100 shares ofCorniche Common Stock for each share of Corniche Series D Convertible PreferredStock and convertible at the option of Corniche if certain conditions specifiedin the Series D Designation are satisfied, and otherwise containing the termsset forth in the Series D Designation. "DGCL" shall mean the Delaware General Corporation Laws. "Exchange Act" shall mean the Securities Exchange Act of 1934, asamended. "GAAP" shall mean United States generally accepted accountingprinciples, consistently applied. "Liens" shall mean liens, encumbrances, security interests, pledges,title restrictions and other limitations on use, other than restrictions onSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.transfer imposed by federal or state securities laws. "Non-Institutional Debt Securities" shall mean the Investor Loansidentified in Appendix 2.1 attached hereto. "Person" means any individual, corporation, partnership, limitedliability company, business trust, sole proprietorship or other entity. "Private Placement Transaction" means that certain private placement ofCorniche Common Stock to the Cash Investors by which Corniche will raise cashnet proceeds to Corniche sufficient to allow Corniche to satisfy the conditionsto Closing set forth herein, which Private Placement Transaction shall closesimultaneously with the stock exchange transactions contemplated in thisAgreement. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended. "Strandtek Capital Stock" shall mean the Strandtek Common Stock. "Strandtek Common Stock" shall mean the common stock, par value $0.0001per share, of Strandtek. "Strandtek Disclosure Schedule" shall mean the schedule of disclosuresseparately delivered by Strandtek to Corniche simultaneously with the executionand delivery of this Agreement and the Supplemental Disclosure Agreement. -3- "Strandtek Material Adverse Effect" shall mean a material adverseeffect on the business, operations, assets or financial condition of Strandtek,provided, however, that in no event shall any effect that results from (a) thepublic announcement or pendency of the transactions contemplated hereby or anyactions taken in compliance with this Agreement, or (b) changes affecting theUnited States economy generally constitute a Strandtek Material Adverse Effect. "Subsidiary" when used with reference to a Person, shall mean anyentity (i) the accounts of which would be consolidated with those of such Personin such Person's financial statements if such financial statements were preparedin accordance with GAAP or (ii) of which securities or other ownership interestsrepresenting more than 50% of the equity or more than 50% of the ordinary votingpower or, in the case of a partnership, more than 50% of the general partnershipinterests or more than 50% of the profits or losses are owned, controlled orheld by such Person and/or one or more subsidiaries of such Person; provided,however, notwithstanding the foregoing, that certain entity known as StrandtekWest, Inc., a Washington corporation ("Strandtek West") which has been dissolvedby the Secretary of State of the State of Washington prior to the draft hereofprior to the date hereof shall not be deemed a "Subsidiary" of Strandtek. "Supplemental Disclosure Agreement" shall mean the agreement amongStrandtek, Corniche, the Principal Shareholders and the Non-shareholder LoanHolders executed this date with respect to the representations and warranties ofthe Parties to each other. 1.2 Terms Defined in Other Sections. The following terms have therespective meanings ascribed thereto in the following sections of thisAgreement: Term Section ---- ------- Agreement Lead-in Business Combination Restraints 5.9.6 Cash Amount 5.9.4 Closing 2.2 Closing Date 2.2 Code Recitals Competing Transaction 5.13 Conversion Price 1.1Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Corniche Lead-in Corniche Business 5.3 Corniche/Strandtek Loan 5.6 Defaulting Party 7.4 Guarantors 5.6 Investor Loan Holders Recitals Investor Loans Recitals Key Holders Percentage 2.1 Non-Defaulting Party 7.4 Non-shareholder Loan Holders Lead-in Note 2.4 Outside Date 7.3.3 -4- Parties Recitals Plan Recitals Premises 5.14 Principal Shareholders Lead-in Registration Statement 5.4 Series D Designation 1.1 Strandtek Lead-in Strandtek Parties 7.2 1.3 Interpretation. Unless otherwise indicated to the contrary hereinby the context or use thereof: (i) the words, "herein," "hereto," "hereof" andwords of similar import refer to this Agreement as a whole and not to anyparticular Section or paragraph hereof; (ii) words importing the masculinegender shall also include the feminine and neutral genders, and vice versa;(iii) words importing the singular shall also include the plural, and viceversa; and (iv) the word "including" means "including without limitation". ARTICLE II THE STOCK EXCHANGE 2.1 Exchange of Stock and Investor Loans. Upon the terms and subject tothe conditions of this Agreement, at the Closing, the Principal Shareholdersshall sell, assign, and deliver to Corniche in the aggregate 178,030,131 sharesof the Strandtek Common Stock constituting at least 97.8% (the "Key HoldersPercentage") of the issued and outstanding, and presently issuable capital stockof Strandtek (treating stock options and warrants to purchase Strandtek CommonStock as not being issued and outstanding, or issuable capital stock ofStrandtek), in exchange for (a) 640,000 times the Key Holders Percentage sharesof the Corniche Series D Preferred Stock and (b) 36,000,000 times the KeyHolders Percentage shares of the Corniche Common Stock, as further set forth onAppendix 2.1. The 640,000 amount is subject to further adjustment (up or down)pursuant to Section 2.5 below. Upon the terms and subject to the conditions ofthis Agreement, at the Closing, the Investor Loan Holders shall sell, assign,and deliver to Corniche the Non-Institutional Debt Securities in the aggregateprincipal amount of not more than $22,000,000, in exchange for up to 220,000shares of Corniche Series C Preferred Stock (i.e., 1 share of Corniche Series CPreferred Stock for each $100 of Non-Institutional Debt Securities exchanged),as further set forth on Appendix 2.1. Provided, however, notwithstandinganything contained in this Agreement to the contrary, the PrincipalShareholders, Non-shareholder Loan Holders and Cash Investors shall in allevents receive as of the Closing at least eighty percent (80%) of the totalcombined voting power of all classes of stock of Corniche entitled to vote, andCorniche shall not have any other class of stock outstanding as of the Closing. 2.2 Closing Date. On the Closing Date, the Parties shall cause thecontribution and exchange of shares and Non-Institutional Debt Securities forthe Corniche Common Stock and Preferred Stock to be effected, along with thesimultaneous closing on the Private Placement Transaction, such that on theClosing of such transactions, Corniche will own the shares of Strandtek CommonStock constituting at least 97% of the issued and outstanding, and presentlyissuable capital stock of Strandtek and the Principal Shareholders,Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Non-shareholder Loan Holders, and Cash -5-Investors shall own more than 80% of the total combined voting power of allclasses of stock of Corniche entitled to vote. A closing (the "Closing") shallbe held at the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland,New Jersey 07068 no later than the Outside Date, provided the conditions setforth in Article VI have been satisfied or waived at or prior to such date. Thedate on which the Closing takes place shall be mutually agreed to by Strandtekand Corniche and is referred to herein as the "Closing Date" 2.3 Tax Consequences. It is intended that the contribution and exchangeof the Strandtek Common Stock, Non-Institutional Debt Securities, and cash inexchange for the Corniche Common Stock and Preferred Stock shall qualify as anon-taxable transfer of property pursuant to the provisions of Section 351 ofthe Code. It is further contemplated and intended that the exchange of sharesshall constitute a "reorganization" within the meaning of Section 368(a) of theCode, and that this Agreement shall constitute a "plan of reorganization" forthe purposes of the Code. All parties shall report, file, and treat thetransaction contemplated in this Agreement in a manner consistent with thisintent for all tax purposes. 2.4 Lost Certificates. In the event that any Certificate for StrandtekCommon Stock held by a Principal Shareholder or any note representing anInvestor Loan ("Note") held by a Principal Shareholder or Investor Loan Holdershall have been lost, stolen or destroyed, upon Corniche's receipt of anaffidavit as to such loss, theft or destruction and as to the ownership of suchCertificate or Note by the Person claiming such Certificate or Note to be lost,stolen or destroyed, and the receipt by Corniche of reasonably appropriate andcustomary indemnification (which shall be in the form of a personal agreement toindemnify but shall not include the posting of a bond or similar security),Corniche shall deliver, in exchange for such lost, stolen or destroyedCertificate or Note, shares of Corniche Common Stock and Series D PreferredStock or Series C Preferred Stock, as applicable, deliverable in respect thereofas determined in accordance with the provisions of this Agreement. 2.5 Adjustment. The numbers 640,000 and 36,000,000 in Section 2.1 weredetermined on the assumption that there would be exactly 36 million shares ofCorniche Common Stock issued and outstanding at the Closing. The 640,000 number(but not the 36,000,000 number) will be increased or decreased to reflect theentire proportionate adjustment due with respect to the 36,000,000 shares ofCorniche Common Stock and 640,000 shares of Corniche Series D Preferred Stockthat would occur if both amounts were proportionately increased or decreased tocompensate for the effect caused if there are more or less than 36,000,000shares of Corniche Common Stock issued and outstanding at Closing. Thus, by wayof example and not in limitation, if there are 34,000,000 shares of CornicheCommon Stock issued and outstanding at the Closing, the number 640,000 inSection 2.1 would be adjusted to 584,444 (computed as follows: (1) total "as ifconverted" shares of Corniche Common Stock to be issued at closing:((64,000,000+36,000,000) times (34,000,000/36,000,000)=94,444,444, (2) Decreasein shares of Corniche Series D Preferred to be issued at closing: (a) Totaldecrease in "as if converted" shares: 100,000,000-94,444,444=5,555,556 "as ifconverted" shares of Corniche Common Stock; (b) Decrease in Corniche Series DPreferred Shares: 5,555,556/100=55,556 shares). Thus, under the aforementionedexample, a total of 584,444 shares of Corniche Series D Preferred Stock and36,000,000 shares of Corniche Common Stock times the Key Holders Percentagewould be issued -6-to the Principal Shareholders at Closing. Corniche shall certify to theStrandtek Parties at Closing the number of shares of Corniche Common Stock thenissued and outstanding. ARTICLE III REPRESENTATIONS AND WARRANTIES Strandtek, the Principal Shareholders and the Investor Loan Holders,Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.solely as to their individual interests and not jointly, represent and warrantto Corniche, and Corniche represents and warrants to Strandtek, the PrincipalShareholders and the Investor Loan Holders, those matters specifically set forthas being represented and warranted by them in the Supplemental DisclosureAgreement being executed simultaneously with this Agreement in the form ofAppendix 3.1. ARTICLE IV INTENTIONALLY OMITTED ARTICLE V COVENANTS OF THE PARTIES 5.1 Further Actions. Strandtek and Corniche agree to use all reasonableefforts to take, or cause to be taken, all actions, and to do, or cause to bedone, and each of the Parties agree to assist and cooperate with the otherParties in doing, all things necessary, proper or advisable to consummate andmake effective, in the most expeditious manner practicable under thecircumstances (after taking into effect all such factors as shall reasonablyeffect timing hereunder), the transactions contemplated by this Agreement,including (a) the obtaining of all other necessary actions or non-actions,waivers, consents, licenses, permits, authorizations, orders and approvals fromgovernmental authorities and the making of all other necessary registrations andfilings, (b) the obtaining of all consents, approvals or waivers from thirdparties related to or required in connection herewith that are necessary toconsummate the transactions contemplated by this Agreement, (c) the closing ofthe Private Placement Transaction simultaneous with the closing of the propertycontribution and stock exchange transactions contemplated in this Agreement, (d)the taking of all action necessary to ensure that the transactions contemplatedhereby and pursuant to the Private Placement Transaction constitute anon-taxable transfer of property pursuant to Section 351 of the Code, (e) thetaking of all action necessary to ensure that the stock exchange transactionscontemplated hereby constitutes a reorganization within the meaning of Section368(a)(1)(B) of the Code, and (f) the execution and delivery of any additionalinstruments necessary to consummate the transactions contemplated by, and tofully carry out the purposes of, this Agreement. Each of the PrincipalShareholders and Investor Loan Holders that is a resident of the State ofFlorida shall take such actions as are necessary to assure the expiration of anyright of rescission of such Person prior to the Closing. 5.2 Indebtedness of Employees and Shareholders. Strandtek will causeany indebtedness in excess of an aggregate of $200,000 owing to it by any of itsemployees (other than salespersons' normal draw) or by its shareholders (which$200,000 amount will remain outstanding) to be paid in full at or before theClosing. Strandtek will not make any loans to employees or shareholders prior tothe Closing that will result in the foregoing sentence being incorrect. -7- 5.3 Public Announcements. Unless otherwise required by applicable law,the Parties shall not make any press release or other public announcementregarding the transactions contemplated hereby or this Agreement without theprior written consent of Corniche and Strandtek, provided that Corniche andStrandtek may make such announcements that they deem necessary to comply withapplicable securities laws, after prior notice to the other Parties of suchannouncement and a fair opportunity to comment thereon. 5.4 Post-Closing Covenants of Corniche, Strandtek and the PrincipalShareholders and Non-shareholder Loan Holders. 5.4.1 [Intentionally Omitted] 5.4.2 Strandtek shall timely provide Corniche with allaudited, unaudited and pro forma financial information and other informationrequired by Corniche (a) to timely file a current report on Form 8-K reportingits acquisition of the Strandtek Common Stock and securities from the PrincipalShareholders and Non-shareholder Loan Holders, (b) to timely prepare and fileits annual report on Form 10-K for its current fiscal year, and (c) to prepareand file a proxy statement with respect to the matters set forth in paragraph5.4.4 below.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.4.3 Corniche shall timely provide Strandtek with allaudited, unaudited and pro forma financial information as well as all otherinformation required by Strandtek (a) to timely file a current report on Form8-K reporting Corniche's acquisition of the Strandtek Common Stock from thePrincipal Shareholders and (b) to timely prepare and file its annual report onForm 10-K for its fiscal year ended September 30, 2001. 5.4.4 Corniche shall, as promptly as practical following theClosing Date and in all cases within 15 days of the Closing Date, (1) schedulean annual or special shareholders meeting of the Corniche shareholders, for thepurpose of (a) (i) increasing the authorized common stock of Corniche from75,000,000 shares to 200,000,000 shares, or (ii) subject to the consent of amajority in number of the Principal Shareholders, effecting a reverse stocksplit to provide for sufficient authorized Corniche Common Stock to allowconversion of the Series D Preferred Stock and Series C Preferred Stock, and (b)to elect a new board of directors of Corniche. Each Principal Shareholder andInvestor Loan Holder agrees to vote in favor of the matter referred to in (a)above at such meeting. Corniche agrees that it shall not issue any shares ofCorniche Capital Stock, whether Corniche Common Stock or any series of preferredstock, during the time period subsequent to the Closing and prior to the holdingof the aforementioned shareholders meeting and the election of a new board ofdirectors of Corniche, except pursuant to the exercise of outstanding optionsand warrants. 5.4.5 Within 24 months after the Closing Date, Strandtek andCorniche shall take all action in accordance with the federal securities laws,the DGCL, Strandtek's Certificate of Incorporation, Strandtek's by-laws,Corniche's Certificate of Incorporation and Corniche's by-laws necessary tocause the shareholders of Strandtek other than the Principal Shareholders toreceive, in exchange for all remaining Strandtek shares and options and warrantsfor Strandtek capital stock shares of Corniche Common Stock and options andwarrants to acquire shares of Corniche Common Stock, at an exchange rate notless favorable than the exchange rate applicable to the Strandtek Common Stockunder Section 2.1. -8- 5.4.6 Registration Rights. The Principal Shareholdersreceiving Corniche Common Stock incident to the contribution and exchangetransaction contemplated by this Agreement, and the Principal Shareholders andInvestor Loan Holders receiving Series C Preferred Stock and Series D PreferredStock incident to the contribution and exchange transaction contemplated hereinwill be entitled to demand registration of the Corniche Common Stock issued tothem and the Corniche Common Stock issuable upon conversion of the CornicheSeries C and Series D Preferred Stock as hereinafter set forth. At any timeafter the date that is six months following the Closing, the PrincipalShareholders and Non-shareholder Loan Holders owning a majority of voting powerof the Corniche Common Stock, Series C Preferred Stock and Series D PreferredStock received at the Closing contemplated in this Agreement may deliver anotice to Corniche demanding the registration of the Corniche Common Stockreceived by the Principal Shareholders and the Corniche Common Stock underlyingthe Corniche Series C and Series D Preferred Stock. Upon the receipt of suchnotice, and to the extent permitted by SEC regulations, Corniche will cause aregistration statement (the "Registration Statement") on the appropriate form tobe promptly filed with the SEC covering the registration for resale of all ofthe shares of Corniche Common Stock issued (and issuable upon conversion) to thePrincipal Shareholders and/or Investor Loan Holders, as applicable. Cornichewill use its best efforts to cause such Registration Statement to be declaredeffective as soon as reasonably possible after the filing thereof with the SEC,which filing shall take place no later than forty-five (45) days afterCorniche's receipt of written demand requiring registration (but which shall notbe required after a fiscal year end until the Form 10-K for such year has beenfiled. ). Corniche agrees to use its best efforts to keep the RegistrationStatement continuously effective and current until at least two (2) yearsfollowing the date the applicable Registration Statement is declared effective.Each Principal Shareholder and/or Investor Loan Holder desiring to includeshares of Corniche Common Stock in such a Registration Statement agrees toprovide Corniche with all information regarding such individual that Cornichemay reasonably request to include such owner's shares in the RegistrationStatement. All obligations and agreements of Corniche contained in this Section5.4.6 shall be performed at Corniche's sole cost and expense. 5.5 Affiliates of Strandtek. Strandtek shall provide Corniche with aSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.letter specifying all of the persons or entities who, in Strandtek's opinion,may be deemed to be "affiliates" of Strandtek and who will continue to beaffiliates of Corniche after the Closing. Corniche shall be entitled to placelegends on the certificates evidencing any shares of the Corniche Common Stockto be received by any such "affiliate" specified in such letter and to issueappropriate stop transfer instructions to the transfer agent for the CornicheCommon Stock owned by such affiliate. 5.6 Interim Loan. Within five (5) business days after the execution ofthis Agreement, Corniche shall advance to Strandtek a loan of $1.0 million($1,000,000) on an unsecured basis but personally guaranteed by Jerome Bauman,William Buckles, Jan Arnett and David Veltman (collectively, the "Guarantors")and otherwise possessing the terms set forth in Appendix 5.6 attached hereto.The guaranty by each Guarantor shall be a fractional guaranty (and not joint andseveral) in the amount of $250,000 each. (Such loan may be referred tohereinafter as the "Corniche/Strandtek Loan"). Such loan shall be evidenced bythe note included in Appendix 5.6 and such other loan documentation as isreasonably requested by Corniche. Notwithstanding anything contained in thisAgreement to the contrary, the failure of Corniche to timely fund this interimloan shall give Strandtek, the Principal Shareholders and the Investor LoanHolders the right to terminate this Agreement upon written notice to Corniche. -9- 5.7 Non-Taxable Treatment. Each of the Parties shall use its bestefforts to cause the contribution and exchange of cash, shares, and InvestorLoans hereunder to qualify as a nontaxable transfer of property to a controlledcorporation under Section 351 of the Code and as a "reorganization" underSection 368(a) of the Code. No Party shall take any action inconsistent with thetreatment of the contribution of cash, Strandtek Shares and Investor Loans inexchange for Corniche Shares as a nontaxable transfer of property to acontrolled corporation under Section 351 of the Code and the acquisition ofStrandtek shares in exchange for Corniche voting shares as a "reorganization"under Section 368(a) of the Code. 5.8 Access and Information. Prior to the Closing, Corniche andStrandtek shall (with personnel acceptable to the other Party as the disclosingparty, which acceptance shall not be unreasonably withheld) be entitled to makeor cause to be made such reasonable investigation of the disclosing party, andthe financial and legal condition thereof, as it reasonably deems necessary oradvisable, and each of Corniche and Strandtek, as the disclosing party, shallcooperate with any such investigation. In furtherance of the foregoing, but notin limitation thereof, each of Strandtek and Corniche, as the disclosing party,shall (a) permit the other Party and its agents and representatives to havereasonable access to the premises, operating systems, computer systems (hardwareand software), computer equipment and books and records of the disclosing partyupon reasonable notice during regular business hours, (b) furnish or cause to befurnished to the other Party such financial and operating data, forecasts,business plans, strategic plans and other data relating to Corniche, Strandtekand their businesses as the other Party shall reasonably request from time totime and (c) cause its accountants to furnish to the other Party and itsaccountants access to all work papers relating to any of the periods covered byfinancial statements provided by the disclosing party to the other Partyhereunder, subject to the execution by the other Party of such reasonable andcustomary documentation as the disclosing party accountants shall request to beexecuted. Prior to the Closing, neither Corniche nor its representatives shalluse any information provided to it in confidence by Strandtek for any purposeunrelated to this Agreement, and in no event shall such persons use theinformation provided by Strandtek competitively. Prior to the Closing, neitherStrandtek nor its representatives shall use any information provided to it inconfidence by Corniche for any purposes unrelated to this Agreement, and in noevent shall such persons use the information provided by Corniche competitively.Except with respect to publicly available documents, in the event that thisAgreement is terminated, (a) Corniche will deliver to Strandtek all documentsobtained by it from Strandtek in confidence or otherwise and any copies thereofin the possession of Corniche or its agents and representatives or, at theoption of Corniche, Corniche shall cause all of such documents and all of suchcopies to be destroyed and shall certify the destruction thereof to Strandtekand (b) Strandtek will deliver to Corniche all documents obtained by it fromCorniche in confidence or otherwise and any copies thereof in the possession ofStrandtek or its agents and representatives or, at the option of Strandtek,Strandtek shall cause all of such documents and all of such copies to beSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.destroyed and shall certify the destruction thereof to Corniche. Noinvestigation by Corniche or Strandtek heretofore or hereafter made shall modifyor otherwise affect the conditions to the obligations of Corniche and Strandtekto consummate the transactions contemplated hereby. 5.8 Strandtek's Affirmative Covenants. Prior to the Closing, except asotherwise expressly provided herein or except as would not result in a StrandtekMaterial Adverse Effect, Strandtek shall and the Principal Shareholders shallcause Strandtek to: -10- 5.8.1 conduct its business only in the ordinary and regularcourse of business consistent with past practices; 5.8.2 use reasonable commercial efforts to keep in full forceand effect its corporate existence and all material rights, franchises, theStrandtek Proprietary Rights (as defined in the Supplemental DisclosureAgreement) and other intellectual property rights and goodwill relating orobtaining to the business; 5.8.3 use reasonable commercial efforts to retain itsemployees and preserve its present relationships with customers, suppliers,contractors, distributors and employees, and, except as previously disclosed toCorniche, continue to compensate its employees consistent with past practices; 5.8.4 use reasonable commercial efforts to maintain theStrandtek Proprietary Rights (as defined in the Supplemental DisclosureAgreement) and other intellectual property so as not to affect adversely thevalidity or enforcement thereof; maintain its other assets in customary repair,order and condition and maintain insurance reasonably comparable to that ineffect on the date of this Agreement; and in the event of any casualty, loss ordamage to any of its assets, repair or replace such assets with assets ofcomparable quality; 5.8.5 maintain its books, accounts and records in accordancewith GAAP; 5.8.6 use reasonable commercial efforts to obtain allauthorizations, consents, waivers, approvals or other actions and to make allfilings and applications necessary or desirable to consummate the transactionscontemplated hereby and to cause the other conditions to Corniche's obligationto close to be satisfied; and 5.8.7 promptly notify Corniche in writing if, prior to theconsummation of the Closing, to its knowledge (a) any of the representations andwarranties of Strandtek or the Principal Shareholders contained in theSupplement Disclosure Agreement cease to be accurate and complete in allmaterial respects other than for changes in the ordinary course of businessprior to closing or (b) Strandtek or a Principal Shareholder or Investor LoanHolder fails to comply with or satisfy any material covenant, condition oragreement to be complied with or satisfied by it hereunder; provided, however,that the delivery of any notice pursuant to this Section 5.8.7 shall not limitor otherwise affect the remedies available hereunder to Corniche. 5.9 Corniche's Affirmative Covenants. Prior to the Closing, except asotherwise expressly provided herein or except as would not result in an CornicheMaterial Adverse Effect, Corniche shall (and Corniche shall cause each of itsSubsidiaries to): 5.9.1 use reasonable commercial efforts to keep in full forceand effect its corporate existence; 5.9.2 maintain its books, accounts and records in accordancewith GAAP; 5.9.3 use reasonable commercial efforts to obtain allauthorizations, consents, waivers, approvals or other actions and to make allfilings and applications necessary or desirable to Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -11-consummate the transactions contemplated hereby and to cause the otherconditions to Strandtek's and the Parties' obligation to close to be satisfied;and 5.9.4 subject to obtaining all required information fordisclosure, use all reasonable commercial efforts to obtain additional capitalfrom the Cash Investors pursuant to the Private Placement Transaction such thatat the simultaneous Closing of the transactions contemplated hereunder and theclosing of the Private Placement Transaction, Corniche has $10 million ofunencumbered cash (counting advances from Corniche to Strandtek pursuant toSection 5.6 as Corniche cash) (the "Cash Amount") in excess of all of Corniche'sliabilities, actual or contingent, accrued or nonaccrued, and all amountsrequired to be paid by Corniche to redeem all of the shares of Series APreferred Stock and Series B Preferred Stock as contemplated in Section 5.9.6hereinafter (such that, by way of example and not in limitation, if Corniche'ssole liabilities, actual or contingent, accrued or nonaccrued, at Closing are afuture lease obligation in the amount of $50,000 and attorneys fees due inconnection with this transaction/Agreement in the amount of $100,000 and allamounts due to redeem the Series A Preferred Stock and the Series B PreferredStock shall have been paid, Corniche would be required to have cash in theamount of $10,150,000 at Closing to satisfy this condition). 5.9.5 if any "control share acquisition", "businesscombination", voting restriction or other form of takeover statute or regulation(collectively, "Business Combination Restraint(s)") is or shall becomeapplicable to the transactions contemplated hereby or any shares of CornicheCommon Stock, Series C Preferred Stock or Series D Preferred Stock to be issuedpursuant to the stock contribution and exchange transaction, Corniche and itsboard of directors shall grant such approvals and take all such actions as arereasonably necessary so that the transactions contemplated hereby, including,without limitation, the conversion of the Series D Preferred Shares and Series CPreferred Shares, may be consummated as promptly as practical on the termscontemplated hereby and thereby and otherwise act to eliminate the effects ofsuch Business Combination Restraints on the transactions contemplated hereby andthereby. 5.9.6 cause the conversion into Corniche Common Stock orredemption of all shares of Corniche Series A Preferred Stock and CornicheSeries B Preferred Stock outstanding, such that the only Corniche PreferredStock to be issued and outstanding at and subsequent to Closing shall be theSeries C Preferred Stock and Series D Preferred Stock to be issued to thePrincipal Shareholders and Investor Loan Holders as contemplated in thisAgreement. 5.9.7 promptly notify Strandtek in writing if, prior to theconsummation of the Closing, to its knowledge (a) any of the representations andwarranties of Corniche contained in the Supplemental Disclosure Agreement ceaseto be accurate and complete in all material respects or (b) Corniche fails tocomply with or satisfy any material covenant, condition or agreement to becomplied with or satisfied by it hereunder; provided, however, that the deliveryof any notice pursuant to this Section 5.9.7 shall not limit or otherwise affectthe remedies available hereunder to Strandtek. Corniche may in its discretion sell or agree to sell all orsubstantially all of the assets comprising the business currently beingconducted by Corniche (the "Corniche Business") provided the foregoingconditions remain satisfied and adhered to. -12- 5.10 Strandtek's Negative Covenants. Prior to the Closing, without theprior written consent of Corniche (which consent will not be unreasonably oruntimely withheld) or as otherwise expressly provided herein, Strandtek will not(and each of the Principal Shareholders will use their reasonable best effortsto prevent Strandtek from taking any such action) and Strandtek will cause itssubsidiary not to:Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.10.1 except as previously disclosed to Corniche, take anyaction or omit to take any action which would result in Strandtek's (a)incurring any trade accounts payable outside of the ordinary course of businessor making any commitment to purchase quantities of any item of inventory inexcess of quantities normally purchased in the ordinary course of business; (b)increasing any of its indebtedness for borrowed money except in the ordinarycourse of business and including the expansion thereof; (c) guaranteeing theobligations of any entity not a Subsidiary of Strandtek; (d) making anypurchases of products other than from entities authorized to sell or distributesuch products; (e) merging or consolidating with, purchasing substantially allof the assets of, or otherwise acquiring any business or any proprietorship,firm, association, limited liability company, corporation or other businessorganization; (f) increasing the rate of compensation of or paying any unusualcompensation to any officer, employee or consultant (other than regularlyscheduled increases in base salary and annual bonuses consistent with priorpractice); (g) entering into or amending any collective bargaining agreement, orcreating or modifying any pension or profit-sharing plan, bonus, deferredcompensation, death benefit, or retirement plan, or any other employee benefitplan, or increasing the level of benefits under any such plan, or extending oraccelerating the exercisability of any outstanding stock option or increasing ordecreasing any severance or termination pay benefit or any other fringe benefit;(h) making any representation to anyone indicating any intention of Corniche toretain, institute, or provide any employee benefit plans; (i) declaring orpaying any dividend or making any distribution with respect to, or purchasing orredeeming, shares of Strandtek capital stock; (j) selling, licensing ordisposing of any assets otherwise than in the ordinary course of business; (k)taking any other action, or omitting to take any action, to the extent that suchaction or omission is outside of the ordinary course of business; (l) grantingor issuing any stock, stock option, warrant or other right to purchase anyStrandtek securities (other than stock issued upon exercise of outstandingdisclosed options or warrants or certificates evidencing outstanding sharesalready reflected on the schedules to the Supplemental Disclosure Agreement,which actions shall be permissible hereunder notwithstanding any contraryprovisions of this Agreement); (m) organizing any subsidiary; 5.10.2 change any method or principle of accounting in amanner that is inconsistent with past practice, except to the extent required byGAAP as advised by Strandtek's regular independent accountants; 5.10.3 take any action that would likely result in therepresentations and warranties of Strandtek or the Principal Shareholders or theInvestor Loan Holders set forth in the Supplemental Disclosure Agreement (otherthan representations made as of a particular date) becoming false or inaccuratein any material respect; 5.10.4 incur or create any Liens on any of its assets otherthan Liens which are incurred in the ordinary course of business; 5.10.5 except as contemplated herein, take any action or omitto take any action which would prejudice Corniche's rights to consummate each ofthe transactions contemplated by -13-this Agreement or to compel performance of each of the obligations of Strandtekunder this Agreement; 5.10.6 take or omit to be taken any action, or permit any ofits Affiliates to take or to omit to take any action, which would reasonably beexpected to result in a Strandtek Material Adverse Effect; 5.10.7 take any action or issue any shares of Strandtekcapital stock that would result in the Principal Shareholders owning less thanthe Key Holders Percentage of the capital stock of Strandtek; 5.10.8 consummate the acquisition of any entity; or 5.10.9 agree or commit to take any action precluded by thisSection 5.10. 5.11 Corniche's Negative Covenants. Prior to the Closing, without theprior written consent of Strandtek (which consent will not be unreasonably orSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.untimely withheld) or as otherwise expressly provided herein, including in thelast sentence of Section 5.9, Corniche will not and Corniche will cause itsSubsidiaries not to: 5.11.1 except as previously disclosed to Strandtek, take anyaction or omit to take any action which would result in Corniche's (a) incurringany trade accounts payable outside of the ordinary course of business or makingany commitment to purchase quantities of any item of inventory in excess ofquantities normally purchased in the ordinary course of business; (b) increasingany of its indebtedness for borrowed money except in the ordinary course ofbusiness; (c) guaranteeing the obligations of any entity; (d) making anypurchases of products other than from entities authorized to sell or distributesuch products; (e) merging or consolidating with, purchasing substantially allof the assets of, or otherwise acquiring any business or any proprietorship,firm, association, limited liability company, corporation or other businessorganization; (f) increasing the rate of compensation of or paying any unusualcompensation to any officer, employee or consultant (other than regularlyscheduled increases in base salary and annual bonuses consistent with priorpractice); (g) entering into or amending any collective bargaining agreement, orcreating or modifying any pension or profit-sharing plan, bonus, deferredcompensation, death benefit, or retirement plan, or any other employee benefitplan, or increasing the level of benefits under any such plan, or extending oraccelerating the exercisability of any outstanding stock option or increasing ordecreasing any severance or termination pay benefit or any other fringe benefit;(h) making any representation to anyone indicating any intention of Corniche toretain, institute, or provide any employee benefit plans; (i) declaring orpaying any dividend or making any distribution with respect to, or purchasing orredeeming, shares of Corniche capital stock, other than the redemption ofCorniche Series A Preferred Stock and Corniche Series B Preferred Stock; (j)making any capital expenditures; (k) taking any other action, or omitting totake any action, to the extent that such action or omission is outside of theordinary course of business; (l) granting or issuing any stock, stock option,warrant or other right to purchase any Strandtek securities (other than stockissued upon exercise of outstanding disclosed options or warrants orcertificates evidencing outstanding shares already reflected on the schedules tothe Supplemental Disclosure Agreement); or (m ) organizing any subsidiary; -14- 5.11.2 change any method or principle of accounting in amanner that is inconsistent with past practice, except to the extent required byGAAP as advised by Corniche's regular independent accountants; 5.11.3 take any action that would likely result in therepresentations and warranties of Corniche set forth in the SupplementalDisclosure Agreement (other than representations made as of a particular date)becoming false or inaccurate in any material respect; 5.11.4 except as contemplated herein, take any action or omitto take any action which would prejudice Strandtek's or the PrincipalShareholders' rights to consummate each of the transactions contemplated by thisAgreement or to compel performance of each of the obligations of Corniche underthis Agreement; 5.11.5 take or omit to be taken any action, or permit any ofits Affiliates to take or to omit to take any action, which would reasonably beexpected to result in an Corniche Material Adverse Effect; 5.11.6 incur or create any Liens on any of its assets; 5.11.7 consummate the acquisition of any entity (by merger,combination, purchase of more than a majority of the equity of such entity orpurchase 15% or more of the assets of such entity); 5.11.8 agree or commit to take any action precluded by thisSection 5.11; or 5.11.9 take any action or issue any shares of Corniche CommonStock that would result in there being more than 39,000,000 shares of CornicheCommon Stock issued and outstanding as of the Closing. 5.12 Closing Documents. Strandtek, the Principal Shareholders and theSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Non-shareholder Loan Holders shall, prior to or on the Closing Date, execute anddeliver, or cause to be executed and delivered, to Corniche the documents orinstruments described in Section 6.2, and all other documents contemplated inthis Agreement to be delivered incident to the Closing or reasonably requiredincident to the Closing. Corniche shall, prior to or on the Closing Date,execute and deliver, or cause to be executed and delivered, to Strandtek, thePrincipal Shareholders and the Non-shareholder Loan Holders the documents orinstruments described in Section 6.3, and all other documents contemplated inthis Agreement to be delivered incident to the Closing or reasonably requiredincident to the Closing. All such closing documents shall be in a formreasonably acceptable to the respective legal counsel of the Parties. 5.13 No Solicitation. Strandtek and each of the Principal Shareholdersagrees that, during the term of this Agreement, it shall not, and it, andStrandtek shall cause its officers, employees, agents or representatives, notto, directly or indirectly, solicit, initiate, encourage or facilitate, orfurnish or disclose non-public information in furtherance of, any inquiries orthe making of any proposal with respect to any recapitalization, merger,consolidation or other business combination involving Strandtek, or acquisitionof any capital stock of Strandtek (other than upon exercise of options orwarrants heretofore disclosed to Corniche by Strandtek) or 15% or more of theassets of -15-Strandtek in a single transaction or a series of related transactions, or anyacquisition by Strandtek of any material assets or capital stock of any otherPerson, or any combination of the foregoing (a "Competing Transaction"), ornegotiate, explore or otherwise engage in discussions with any Person (otherthan Corniche, or its respective directors, officers, employees, agents andrepresentatives) with respect to any Competing Transaction or enter into anyagreement, arrangement or understanding requiring it to abandon, terminate orfail to consummate the stock exchange or any other transactions contemplated bythis Agreement. Strandtek will immediately cease all existing activities,discussions and negotiations with any parties conducted heretofore with respectto any proposal for a Competing Transaction. Notwithstanding any of theforegoing provisions of this Section 5.13 to the contrary, nothing contained inthis Section 5.13 shall prohibit or inhibit the Board of Directors of Strandtekfrom discharging its fiduciary duties vis-a-vis Strandtek in their role asdirectors as determined in good faith after consultation with its outside legalcounsel; but, provided all terms and conditions contained in this Agreement tothe Principal Shareholders' and Non-shareholder Loan Holders' obligations toclose have been satisfied, the Principal Shareholders and Non-shareholder LoanHolders must nonetheless proceed with the stock exchange regardless of anyposition taken by such persons in their capacities as directors, and Strandtekmay not hinder the individuals from exchanging their Strandtek stock and noteswith Corniche or otherwise seek to cause the Principal Shareholders ofNon-shareholder Loan Holders to breach their obligations hereunder. 5.14 Environmental Matters. Prior to the Closing, Corniche shall havethe right, at its expense, to make such environmental studies of each of thepremises at which Strandtek conducts business (the "Premises"), includingreviewing records, inspecting the properties and testing the air, subsoil,groundwater and building materials at the Premises, or otherwise obtainenvironmental data from Strandtek as it deems necessary to determine whether thePremises are in compliance with all applicable Environmental Laws and whetherany Regulated Substances are present at the Premises, and Corniche shallindemnify and hold Strandtek and its Subsidiaries harmless from any loss, costor damage proximately caused by such inspection. ARTICLE VI CONDITIONS 6.1 Conditions to the Obligations of Each Party. The obligations ofeach Party to consummate the stock exchange contemplated hereby shall be subjectto the satisfaction of the following conditions: 6.1.1 No governmental authority of competent jurisdictionshall have enacted, issued, promulgated, enforced or entered any statute, rule,regulation, judgment, decree, injunction or other order which is in effect,which would prohibit consummation of the transactions contemplated by thisSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Agreement or would result in a Combined Material Adverse Effect uponconsummation of such transactions. 6.1.2 There shall not be pending any legal proceeding by anygovernmental authority or other third party (i) challenging or seeking torestrain or prohibit the consummation of this Agreement, (ii) seeking toprohibit or limit the ownership or operation by Strandtek, Corniche or anySubsidiary of Corniche or Strandtek of, or to compel Strandtek, Corniche or anySubsidiary -16-of Corniche or Strandtek to dispose of or hold separate, any material portion ofthe business or assets of Strandtek, Corniche or any Subsidiary of Corniche orStrandtek, as a result of the transactions contemplated by this Agreement, (iii)seeking to impose limitations on the ability of Corniche to acquire or hold, orexercise full rights of ownership of, any shares of capital stock of Strandtek,including the right to vote such capital stock on all matters properly presentedto the shareholders of Strandtek, (iv) seeking to impose limitations on theability of the Principal Shareholders and/or Non-shareholder Loan Holders toacquire or hold, or exercise full rights of ownership of, any shares of capitalstock of Corniche, including the right to vote such capital stock on all mattersproperly presented to the shareholders of Corniche, (v) seeking to prohibitCorniche or any Subsidiary of Corniche or Strandtek from effectively controllingin any material respect the business or operations of Corniche or theSubsidiaries of Corniche or Strandtek or (vi) threatening the imposition of anyaction which would result in a Combined Material Adverse Effect uponconsummation of the transactions contemplated by this Agreement. 6.2 Conditions to Corniche's Obligations. The obligations of Cornicheto consummate the transactions contemplated by this Agreement shall be subjectto the fulfillment prior to or at Closing of each of the following conditions: 6.2.1 The representations and warranties of Strandtek, thePrincipal Shareholders and the Investor Loan Holders as applicable, set forth inthe Supplemental Disclosure Agreement shall be true and correct in all materialrespects (other than representations and warranties which are qualified as tomateriality, which representations and warranties shall be true in all respects)on the date hereof and on and as of the Closing Date as though made on and as ofthe Closing Date (except for representations and warranties made as of aspecified date, which shall be measured only as of such specified date). 6.2.2 Strandtek, the Principal Shareholders and the InvestorLoan Holders shall have performed in all material respects each obligation andagreement and shall have complied in all material respects with each covenant tobe performed and complied with by it under this Agreement at or prior to theClosing. 6.2.3 Strandtek shall have (a) filed with the SEC its AnnualReports on Form 10-K for the years ended September 30, 1998, 1999, 2000 and 2001and all Quarterly Reports on Form 10-Q for the quarters ended December 31, 2000,March 31, 2001 and June 30, 2001 and any other reports required to be filed forperiods after September 30, 2001, and (b) filed all federal and state taxreturns due as of or prior to the Closing Date, which returns shall show nomaterial liabilities due to any taxing authority and net operating lossesconsistent with prior disclosures to Corniche. Since September 30, 2000, thereshall not have occurred, nor shall Corniche have discovered in its continued duediligence any act, event or omission resulting in an Strandtek Material AdverseEffect, nor any loss or damage to the assets of Strandtek, whether or notinsured, which materially affects the ability of Strandtek to conduct itbusinesses. Corniche shall have received a certificate (executed by thePresident or a Vice-President of Strandtek to such officer's best knowledge),dated as of the Closing Date, to the foregoing effect and to the further effectthat any liabilities of Strandtek at the date hereof which were not reflected onthe Current Balance Sheet (as defined in the Supplemental Disclosure Agreement)are either (a) liabilities or obligations incurred in the ordinary course ofbusiness and consistent with past practice since the date of the Current BalanceSheet that would not, -17-Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.singly or in the aggregate, be reasonably expected to have an Strandtek MaterialAdverse Effect or (b) liabilities contemplated by this Agreement. 6.2.4 All material authorizations, consents, waivers,approvals or other actions required in connection with the execution, deliveryand performance of this Agreement by Strandtek and Corniche and the consummationby Strandtek and Corniche of the transactions contemplated hereby shall havebeen obtained and shall be in full force and effect. Strandtek and Cornicheshall have obtained any authorizations, consents, waivers, approvals or otheractions required to prevent a material breach or default by Strandtek, Cornicheor any Subsidiary of Corniche or Strandtek under any material contract to whichStrandtek, Corniche or any Subsidiary of Corniche or Strandtek is a party or forthe continuation of any material agreement to which Strandtek, Corniche or anySubsidiary of Corniche or Strandtek is a party. In particular, Strandtek shallhave obtained the consent of all customers, lenders and lessors, including thoselisted on Schedule 3.19.2 to the Supplemental Disclosure Agreement, without anymaterial cost or adverse change in contract terms, including but not limited toany acceleration of the obligations owed to any such Persons. 6.2.5 There shall not be pending any legal proceedingsrelating to Strandtek which have a reasonable likelihood of being determinedadversely to Strandtek and, if so determined, would be reasonably likely to havean Combined Material Adverse Effect after the Closing. 6.2.6 Prior to or at the Closing, Strandtek, the PrincipalShareholders and the Investor Loan Holders shall have delivered such otherclosing documents as shall be reasonably requested by Corniche in form andsubstance acceptable to Corniche (which acceptance shall not be unreasonablywithheld), including the following: 6.2.6.1 a certificate of the President orVice-President of Strandtek, dated the Closing Date, to the effect that (1) theperson signing such certificate is familiar with this Agreement, (2) withrespect to Strandtek, the conditions specified in Section 6.2.1, 6.2.2 and 6.2.9have been satisfied or identifying any exceptions (in which case Corniche mayrefuse to close based on any such exceptions), and (3) with respect to thePrincipal Shareholders and Investor Loan Holders, to the knowledge of suchperson, the conditions specified in Section 6.2.1 and 6.2.2 have been satisfiedor identifying any exceptions (in which case Corniche may refuse to close basedon such exceptions); 6.2.6.2 a certificate of the Secretary or AssistantSecretary of Strandtek, dated the Closing Date, as to the incumbency of anyofficer of such entity executing this Agreement; 6.2.6.3 a certified copy of (1) the Certificate ofIncorporation and by-laws of Strandtek and all amendments thereto, and (2) theresolutions of Strandtek's Board of Directors authorizing the execution,delivery and consummation of this Agreement and the transactions contemplatedhereby; 6.2.6.4 good standing certificates with respect toStrandtek from such jurisdictions as Corniche shall reasonably designate; -18- 6.2.6.5 share certificates for the shares beingexchanged hereunder, free and clear of all Liens, duly endorsed by the PrincipalShareholders and accompanied by duly executed stock powers in form sufficient topermit transfer of all such shares to Corniche; 6.2.6.6 evidence of the Investor Loans dulysurrendered for cancellation by the Investor Loan Holders; and 6.2.6.7 a certificate of each Principal Shareholderand Investor Loan Holder, which certificates shall not survive Closing, to theeffect that the conditions specified in Sections 6.2.1 and 6.2.2 with respect tosuch Principal Shareholder or Investor Loan Holder have been satisfied oridentifying any exceptions (in which case Corniche may refuse to close based onany such exceptions).Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 6.2.7 Strandtek Loans. 6.2.7.1 The aggregate indebtedness of Strandtek atthe Closing Date to banks and other financial institutions (including interestowed and unpaid thereon) and the principal amount of "Investor Loans" (excludingthe Corniche/Strandtek Loans, accrued and unpaid interest on the Investor Loans,accounts payable, accrued expenses and the like) shall be less than $34 millionin the aggregate. Strandtek and the Investor Loan Holders represent that thecurrent amount due with respect to the Investor Loans described above is as setforth on Appendix 2.1. 6.2.7.2 The aggregate principal indebtedness(excluding accrued and unpaid interest on the Investor Loans) of Strandtek dueat the Closing Date to the Investor Loan Holders (the "Investor Loans") shall beequal to or less than $22 million (after the Strandtek repayments contemplatedin Section 6.3.9). Strandtek and the Investor Loan Holders represent that thecurrent indebtedness of Strandtek to such individuals is as set forth in Section3.2.3 of the Strandtek Disclosure Schedules. 6.2.8 Options and Warrants: 6.2.8.1 Except for Ron Basar, who will continue toown 150,000 Strandtek Series B Warrants and 150,000 Strandtek Series C Warrants,each Principal Shareholder and Investor Loan Holder shall have exercised orcanceled all options, warrants, or other securities convertible into, orexchangeable or exercisable for Strandtek Capital Stock. 6.2.8.2 There shall be outstanding no options,warrants, or other securities convertible into, or exchangeable or exercisablefor Strandtek Capital Stock, except as set forth on Schedule 3.2.2 to theSupplemental Agreement, as follows -- up to 500,000 Series A Warrantsexerciseable at $.41 per share (with an expiration date of no later thanSeptember 30, 2004), up to 300,000 Series B warrants exercisable at $.81 pershare, and up to 300,000 Series C warrants exercisable at $1.22 per share. 6.2.9 Affiliate Agreements. All transactions and agreementsbetween Strandtek and its Affiliates (including the Principal Shareholders andtheir Affiliates) have been terminated except the Management Agreement fullydescribed in Schedule 3.3.3 to the Supplemental Disclosure Agreement and thegroup insurance trust, each of which shall continue and annual salaries of -19-$25,000, $45,000 and $45,000 shall continue to be paid to Messrs. Bauman,Buckles and Veltman until new chief executive and chief financial officers areelected. 6.3 Conditions to Strandtek's, the Principal Shareholders' and InvestorLoan Holders' Obligations. The obligations of the Strandtek, the PrincipalShareholders and the Investor Loan Holders to consummate the transactionscontemplated by this Agreement shall be subject to the fulfillment at or priorto the Closing of each of the following conditions: 6.3.1 The representations and warranties of Corniche set forthin Supplemental Disclosure Agreement shall be true and correct in all materialrespects (other than representations and warranties which are qualified as tomateriality, which representations and warranties shall be true in all respects)on the date hereof and on and as of the Closing Date as though made on and as ofthe Closing Date (except for representations and warranties made as of aspecified date, which shall be measured only as of such specified date). 6.3.2 Corniche shall have performed in all material respectseach obligation and agreement and shall have complied in all material respectswith each covenant to be performed and complied with by Corniche under thisAgreement at or prior to the Closing, including, without limitation, theredemption of the Corniche Series A Preferred Stock and the redemption and/orconversion into Corniche Common Stock of the Corniche Series B Preferred Stock,and the delivery to the Principal Shareholders and the Investor Loan Holders ofthe Corniche Common Stock, Corniche Series D Preferred Stock, and CornicheSeries C Preferred Stock, respectively, to which they are entitled to pursuantto the terms hereof, such that the only capital stock of Corniche outstanding asof the Closing Date shall be shares of stock determined under Section 351 of theSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Code to be voting stock of Corniche. 6.3.3 Since September 30, 2001 (the date of Corniche's mostrecent filed Form 10-Q) there shall not have occurred, nor shall the StrandtekParties have discovered in their continued due diligence, any act, event oromission resulting in an Corniche Material Adverse Effect, nor any loss ordamage to the assets of Corniche, whether or not insured, which materiallyaffects the ability of Corniche to conduct its business. Strandtek shall havereceived a certificate (executed by the President or a Vice-President ofCorniche to such officer's best knowledge), dated as of the Closing Date, to theforegoing effect and to the further effect that there are no liabilities, actualor contingent, accrued or unaccrued, of Corniche at the Closing Date which werenot reflected on the Current Balance Sheet (as defined in the SupplementalDisclosure Agreement), or disclosing any such liabilities, actual or contingent,accrued or unaccrued, not reflected on the Current Balance Sheet of Corniche. 6.3.4 All material authorizations, consents, waivers,approvals or other actions required in connection with the execution, deliveryand performance of this Agreement by Strandtek and Corniche and the consummationby Strandtek and Corniche of the transactions contemplated hereby shall havebeen obtained and shall be in full force and effect. Strandtek and Cornicheshall have obtained any authorizations, consents, waivers, approvals or otheractions required to prevent a material breach or default by Strandtek, Cornicheor any Subsidiary of Corniche or Strandtek under any material contract to whichStrandtek, Corniche or any Subsidiary of Corniche or Strandtek is a party or forthe continuation of any material agreement to which Strandtek, Corniche or anySubsidiary of Corniche or Strandtek is a party. -20- 6.3.5 There shall not be pending any legal proceedingsrelating to Corniche which have a reasonable likelihood of being determinedadversely to Corniche and, if so determined, would be reasonably likely to havean Combined Material Adverse Effect after the Closing. 6.3.6 Prior to or at the Closing, Corniche shall havedelivered such other closing documents as shall be reasonably requested byStrandtek in form and substance acceptable to Strandtek (which acceptance shallnot be unreasonably withheld), including the following: 6.3.6.1 a certificate of the President or a VicePresident of Corniche, dated the Closing Date, to the effect that (1) the personsigning such certificate is familiar with this Agreement and (2) the conditionsspecified in Sections 6.3.1 and 6.3.2 have been satisfied or identifying anyexceptions (in which case Strandtek, the Principal Shareholders and the InvestorLoan Holders each may refuse to close based on any such exceptions); 6.3.6.2 a certificate of the Secretary or AssistantSecretary of Corniche dated the Closing Date, as to the incumbency of anyofficer of Corniche executing this Agreement; 6.3.6.3 a certified copy of (1) the RestatedCertificate of Incorporation and by-laws of Corniche and all amendments thereto,and (2) the resolutions of Corniche's Board of Directors authorizing theexecution, delivery and consummation of this Agreement and the transactionscontemplated hereby; 6.3.6.4 good standing certificates with respect toCorniche from such jurisdictions as Strandtek shall reasonably designate; and 6.3.6.5 share certificates for the shares beingissued hereunder, free and clear of all Liens, duly authorized and issued, fullypaid and non-assessable, and free from any voting limitations and/orrestrictions and/or Business Combination Restraints. 6.3.7 Corniche shall simultaneously close the PrivatePlacement Transaction and as a result thereof shall have unencumbered cash andcash equivalents in excess of all Corniche liabilities, actual or contingent,accrued or unaccrued, and after payment of all amounts required to be paid toredeem to Corniche Series A Preferred Stock and Corniche Series B PreferredStock, of not less than the Cash Amount as of the Closing Date (such that, byway of example and not in limitation, if Corniche's sole liabilities, actual orcontingent, accrued or unaccrued, at Closing are a future lease obligation inSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the amount of $50,000 and attorney fees due in connection with thistransaction/Agreement in the amount of $100,000 and all amounts due to redeemthe Series A Preferred Stock and the Series B Preferred Stock have been paid,Corniche would be required to have cash in the amount of $10,150,000 at Closingto satisfy this condition). 6.3.8 There shall be no Corniche preferred stock issued oroutstanding at or subsequent to the Closing Date other than the Series CPreferred Stock and Series D Preferred Stock to be issued to the PrincipalShareholders and Investor Loan Holders as contemplated in this Agreement. ThePrincipal Shareholders, Non-shareholder Loan Holders and Cash Investors shallreceive as of the Closing at least eighty percent (80%) of the total combinedvoting power of all -21-classes of stock of Corniche entitled to vote, and Corniche shall not have anyother class of stock outstanding as of the Closing. 6.3.9 The Investor Loan Holders and the Principal Shareholdersand/or their affiliates shall have received payment from Strandtek for allaccrued and unpaid interest owed to them and Mssrs. Bauman, Buckles and Veltmanshall have received payment for all compensation owed to them, in an aggregateamount not to exceed $2.5 million for such interest and compensation, and, Mr.Buckles (as to $21,000) and Mr. David Veltman (as to the remainder) shall havereceived payment of the amount by which the principal balance of the InvestorLoans exceeds $22 million. 6.3.10 Strandtek, the Principal Shareholder and the Investorloan Holders shall have received a tax opinion from Ernst & Young, LLP in formand content acceptable to them opining that the stock exchange transactionscontemplated by this Agreement constitute a non-taxable transfer of property toa controlled corporation pursuant to the provisions of Section 351 of the Code. 6.3.11 There shall be outstanding no more than 780,500options, warrants or other securities convertible into, or exchangeable forCorniche capital stock, common or preferred. No such options, warrants orsecurities have an exercise conversion or exchange price less than $.31. 6.3.12 There shall be no more than 39,000,000 shares ofCorniche Common Stock issued and outstanding as of the Closing Date. 6.4 By closing, each Party shall be deemed to have irrevocablyrepresented and warranted that they have, with respect to any (a) covenants tobe performed by other Parties prior to Closing (but not with respect tocovenants or agreements to be performed post Closing) and (b) conditionsapplicable to their obligation to close, waived or verified compliance with allsuch covenants to be performed prior to Closing and such closing conditions, andno such matters shall be a basis for any subsequent claims by any such Party,except for claims based on fraud. All such covenants and agreements to beperformed post Closing shall survive the Closing for an indefinite period oftime. ARTICLE VII AMENDMENT AND TERMINATION 7.1 Amendment. This Agreement may be amended by the Parties, in thecase of Corniche or Strandtek, by action taken or authorized by their respectiveBoards of Directors (or authorized Executive Committees thereof).Notwithstanding the foregoing, this Agreement may not be amended except by aninstrument in writing signed on behalf of each of the Parties. 7.2 Extension; Waiver. At any time prior to the Closing Date, Corniche(with respect to Strandtek, the Principal Shareholders and the Investor LoanHolders (collectively, the "Strandtek Parties") and the Strandtek Parties (withrespect to Corniche) by action taken or authorized individually by them, or bytheir respective Boards of Directors (or authorized Executive Committeesthereof) in the case of Corniche and Strandtek, may, to the extent legallyallowed, (a) extend the time for the performance of any of the obligations orother acts of such Party, (b) waive any inaccuracies Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -22-in the representations and warranties contained herein or in any documentdelivered pursuant hereto and (c) waive compliance with any of the agreements orconditions contained herein. Any agreement on the part of a Party to any suchextension or waiver shall be valid only if set forth in a written instrumentsigned on behalf of such Party except as otherwise provided to the contrary inthis Agreement. 7.3 Termination. This Agreement may be terminated at any time prior tothe Closing Date: 7.3.1 by mutual written consent of Corniche and the StrandtekParties; 7.3.2 by either Corniche or the Strandtek Parties if thereshall be any law or regulation that, as supported by the written opinion oflegal counsel, makes consummation of the transactions contemplated herebyillegal or otherwise prohibited, or if any judgment, injunction, order or decreeof a court or other competent governmental authority enjoining Corniche or anyof the Strandtek Parties from consummating the transactions contemplated herebyshall have been entered and such judgment, injunction, order or decree shallhave become final and nonappealable; 7.3.3 by either Corniche or the Strandtek Parties if thetransactions hereunder shall not have been consummated on or before January 30,2002 (the "Outside Date"); 7.3.4 by Corniche or the Strandtek Parties if, at or beforethe completion of the Closing, it shall have discovered that any representationor warranty made in this Agreement or in the Supplemental Disclosure Agreementfor its benefit, or in any certificate, exhibit or document furnished to itpursuant to this Agreement, is untrue in any material respect (other thanrepresentations and warranties which are qualified as to materiality, whichrepresentations and warranties will give rise to termination if untrue in anyrespect); provided, however, that in order to terminate this Agreement underthis Section 7.3.4, the terminating Party shall, upon discovery of such a breachor default, give written notice thereof to the breaching or defaulting Party andthe latter shall fail to cure the breach or default by the earlier of thirty(30) calendar days after receipt of such notice or the day immediately prior tothe Outside Date; 7.3.5 by Corniche if any of the Strandtek Parties shall havedefaulted in the performance of any material obligation under this Agreement;provided, however, that in order to terminate this Agreement under this Section7.3.5, Corniche shall, upon discovery of such a breach or default, give writtennotice thereof to Strandtek and the Principal Shareholders and Strandtek or thePrincipal Shareholders shall fail to cure the breach or default by the earlierof thirty (30) calendar days after receipt of such notice or the day immediatelyprior to the Outside Date; 7.3.6 by the Strandtek Parties, if Corniche shall havedefaulted in the performance of any material obligation under this Agreement;provided, however, that in order to terminate this Agreement under this Section7.3.6 with respect to any breach other than a breach of Section 5.6, theStrandtek Parties shall, upon discovery of such a breach or default, givewritten notice thereof to Corniche and Corniche shall fail to cure the breach ordefault by the earlier of thirty (30) calendar days after receipt of such noticeor the day immediately prior to the Outside Date; -23- 7.3.7 by Corniche or the Strandtek Parties if anyauthorization, consent, waiver or approval required for the consummation of thetransactions contemplated hereby shall require the divestiture or cessation ofany of the present business or operations conducted by Corniche, itsSubsidiaries or Strandtek or its Subsidiaries, or shall impose any othercondition or requirement, which divestiture, cessation, condition or requirementwould constitute a Combined Material Adverse Effect upon consummation of thetransactions contemplated by this Agreement;Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7.3.8 by Corniche, in the event that any of the conditions toits obligations set forth in Article VI have not been satisfied or waived by theOutside Date or in the event that any such condition cannot possibly besatisfied prior to the Outside Date; or 7.3.9 by the Strandtek Parties, in the event that any of theconditions to its obligations set forth in Article VI have not been satisfied orwaived by the Outside Date or in the event that any such condition cannotpossibly be satisfied prior to the Outside Date. 7.4 Effect of Non-compliance or Failure to Satisfy Conditions. In theevent any Party fails to comply or satisfy any of its covenants and agreementsto be performed prior to the Closing Date as herein provided, or if any Party'srepresentations and warranties hereunder or pursuant to the SupplementalDisclosure Agreement shall be inaccurate in any respect, (hereinafter, any suchParty whose covenants, agreements, representations or warranties may not besatisfied or accurate at the Closing Date may be referred to as a "DefaultingParty" and all other Parties may be hereinafter referred to as the"Non-Defaulting Party"), or if any conditions to a Party's obligation to closethe transactions contemplated in this Agreement are not satisfied prior to theClosing Date, the Non-Defaulting Party's sole rights and remedies (or theapplicable Party's sole rights and remedies, in the case of a failure to satisfyany condition to such Party's obligation to close) shall be either to (a) waiveany such non-compliance with such covenants, agreements, representations,warranties and conditions and any claim to damages on account thereof andcomplete the transactions contemplated in this Agreement subject to all suchwaivers, inaccuracies and defects and without any liability for suchinaccuracies or defects and without any abatement of the consideration to beexchanged hereunder, or (b) notify the Defaulting Party and other Parties thatit elects not to complete the transactions contemplated by this Agreement, inwhich event of termination all rights and liabilities of the Parties each to theother pursuant to this Agreement and any documents executed in connectionherewith, except for any provisions relating to the confidentiality obligationsof the Parties to each other and the provisions of Section 9.9, shall end andterminate without liability to the others. The aforementioned options providedto a Non-Defaulting Party, or a Party whose conditions to Closing have not beensatisfied, in the event of any such defect, matter, condition or item are thesole and exclusive remedy of such Non-Defaulting Party (or Party whoseconditions to Closing have not been satisfied) with respect to any such matters,and in no event shall a Party have the right to seek damages or specificperformance from another Party on account thereof, all such rights and claimsbeing hereby irrevocably waived and released. Notwithstanding any of theprovisions of this Section 7.4 to the contrary, if Closing occurs, all covenantsand agreements to be performed post-Closing shall survive the Closing for anindefinite period of time and shall be enforceable by the applicable Parties. -24- ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES 8.1 Survival of Representations and Warranties. Other than therepresentations of the Principal Shareholders and the Investor Loan Holderscontained in Sections 4.1 through 4.14 of the Supplemental Disclosure Agreement,the representations of Strandtek pursuant to Section 3.2.1 and 3.2.2 of theSupplemental Disclosure Agreement, and the representations of Corniche pursuantto Section 5.2.1 and 5.2.2, and 5.26 of the Supplemental Disclosure Agreement,as such representations are modified and updated as of the Closing Date, whichrepresentations shall survive the Closing for an indefinite period, allrepresentations and warranties provided for herein or in the SupplementalDisclosure Agreement shall not survive the Closing, and by Closing each Partyshall be deemed to have satisfied itself as to the accuracy of any such otherrepresentations and warranties made by other Parties and/or waived anyinaccuracies contained therein, and no such other representations or warrantiesshall be the basis for any claim by a Party against the others subsequent to theClosing Date except for claims based on fraud. ARTICLE IX MISCELLANEOUSSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 9.1 Notices. All notices or other communications required or permittedhereunder shall be in writing and shall be delivered personally, by telecopy, byovernight courier or sent by certified or registered mail, postage prepaid, andshall be deemed given when so delivered personally, or when so received byfacsimile or courier, or if mailed, three calendar days after the date ofmailing, as follows (or at such other address for a Party as shall be specifiedby like notice): 9.1.1 if to Corniche: Mr. James Fyfe Corniche Group Incorporated 22 James's Square London, England SW1Y4LB Telephone: (44) 207-839-2042 -25- with a copy (which shall not constitute notice) to: Alan Wovsaniker, Esq. Lowenstein Sandler PC 65 Livingston Avenue Roseland, NJ 07068 Telephone: 973-597-2500 Telecopy: 973-597-2400 9.1.2 if to Strandtek: Strandtek International, Inc. 2294 Northwest 55th Street Boca Raton, FL 33496 Attention: Jerome Bauman Telephone: 561-997-9525 Telecopy: and Strandtek International, Inc. 455 N. Indian Rocks Road Belleair Bluffs, FL 33770 Attention: William G. Buckles, Jr. Telephone: 727-585-6333 Telecopy: 727-581-6107 with a copy (which shall not constitute notice) to: Morris LeCompte, Esq. Morris A. LeCompte, P.A. 100 Second Avenue South St. Petersburg, FL 33701 Telephone: 727-823-5000 x 1011 Telecopy: 727-894-1023 9.1.3 if to the Principal Shareholders or the Non-shareholderLoan Holders: To their respective addresses indicated on the signature pages hereto with a copy (which shall not constitute notice) to: Morris A. LeCompte, Esq. Morris A. LeCompte, P.A. 100 Second Avenue South St. Petersburg, FL 33701 Telephone: 727-823-5000 x 1011 Telecopy: 727-894-1023Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -26- 9.2 Interpretation. When a reference is made in this Agreement to anArticle, Section or Paragraph, such reference shall be to an Article, Section orParagraph of this Agreement unless otherwise indicated. The headings containedin this Agreement are for reference purposes only and shall not affect in anyway the meaning or interpretation of this Agreement. 9.3 Counterparts; Telecopied Signatures. This Agreement may be executedin counterparts, which together shall constitute one and the same Agreement. TheParties may execute more than one copy of the Agreement, each of which shallconstitute an original. A signed signature page telecopied by one Party toanother Party shall be deemed to constitute an original. 9.4 Entire Agreement. This Agreement (including the appendices,documents and other instruments referred to herein), the Supplemental DisclosureAgreement and the Confidentiality and Non-Disclosure Agreements betweenStrandtek and Corniche dated on or about July 16, 2001 previously executed anddelivered by the Parties constitute the entire agreement among the Parties andsupersede all prior agreements and understandings, arrangements orrepresentations by or among the Parties, written and oral, with respect to thesubject matter hereof and thereof. 9.5 No Third Party Beneficiaries. Nothing in this Agreement, express orimplied, is intended or shall be construed to create any third partybeneficiaries. 9.6 Governing Law. Except to the extent that the laws of thejurisdiction of organization of any Party, or any other jurisdiction, aremandatorily applicable to matters arising under or in connection with thisAgreement, this Agreement shall be governed by the laws of the State of Delawarewithout regard to conflicts of laws principles. 9.7 No Trial by Jury. 9.7.1 Each of the Parties irrevocably consents to the serviceof any summons and complaint and any other process in any action or proceedingrelating to the transactions contemplated hereby, on behalf of itself or itsproperty, by the delivery of copies of such process to such Party in the samemanner as notice is to be provided pursuant to Section 9.1. Nothing in thisSection 9.7.1 shall affect the right of any Party hereto to serve legal processin any other manner permitted by law. 9.7.2 Each Party acknowledges and agrees that any controversywhich may arise under this Agreement is likely to involve complicated anddifficult issues, and therefore each Party hereby irrevocably andunconditionally waives any right such Party may have to a trial by jury inrespect to any litigation directly or indirectly arising out of or relating tothis Agreement or the transactions contemplated by this Agreement. Each Partycertifies and acknowledges that (i) no representative, agent or attorney of anyother Party has represented, expressly or otherwise, that such other Party wouldnot, in the event of litigation, seek to enforce the foregoing waiver, (ii) eachsuch Party understands and has considered the implications of this waiver, (iii)each such Party makes this waiver voluntarily, and (iv) each such Party has beeninduced to enter into this Agreement by the waivers and certifications in thisSection 9.7.2. 9.8 Assignment. Neither this Agreement nor any of the rights, interestsor obligations hereunder shall be assigned by any of the Parties (whether byoperation of law or otherwise) without the prior written consent of the otherParties. Subject to the preceding sentence, this Agreement shall -27-be binding upon, inure to the benefit of and be enforceable by the Parties andtheir respective successors and assigns.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 9.9 Expenses. All costs and expenses incurred in connection with thisAgreement and the transactions contemplated hereby and thereby shall be paid bythe Party incurring such expenses. 9.10 Severability. The invalidity of any portion hereof shall notaffect the validity, force or effect of the remaining portions hereof. If it isever held that any restriction hereunder is too broad to permit enforcement ofsuch restriction to its fullest extent, such restriction shall be enforced tothe maximum extent permitted by law. 9.11 No Strict Construction. Each of Corniche and the Strandtek Partiesacknowledge that this Agreement has been prepared jointly by the Parties andthat there shall not be a presumption that ambiguities shall be construedagainst any Party by virtue of this Agreement's preparation. 9.12 Knowledge. Any representation made herein or in the SupplementalDisclosure Agreement which is qualified by the knowledge of, or notice given to,Strandtek shall refer to the actual knowledge of, or notice actually given to,any of the executive officers of Strandtek, after reasonable inquiry by suchexecutive officers. Any representation made herein or in the SupplementalDisclosure Agreement which is qualified by the knowledge of, or notice given to,Corniche shall refer to the actual knowledge of, or notice actually given to,any of the executive officers of Corniche, after reasonable inquiry by suchexecutive officers. Any representation made herein or pursuant to any documentor certificate contemplated herein which is qualified by the knowledge of, ornotice given to, the Principal Shareholders or Non-shareholder Loan Holdersshall refer to the actual knowledge of such individual, without any duty ofinquiry. (Signature Page Follows) -28- IN WITNESS WHEREOF, Corniche, Strandtek, each of the PrincipalShareholders and the Non-shareholder Loan Holders have signed this Agreement asof the date first written above. CORNICHE GROUP INCORPORATED By: /s/ James Fyfe ----------------------------- Name: James Fyfe Title: Chairman STRANDTEK INTERNATIONAL, INC. By: /s/ Jerome Bauman ----------------------------- Name: Jerome Bauman Title: President PRINCIPAL SHAREHOLDERS:/s/ David Veltman /s/ Jerome Bauman --------------------------- ---------------------------------David Veltman Jerome Bauman455 N. Indian Rocks Road 2294 Northwest 55th StreetBelleair Bluffs, FL 33770 Boca Raton, FL 33496/s/ Greg Veltman /s/ Jan Arnett--------------------------- ---------------------------------Greg Veltman Jan Arnett455 N. Indian Rocks Road Longwood RoadBelleair Bluffs, FL 33770 Sands Point, NJ 11050Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results./s/ Sheila Duffy /s/ William G. Buckles, Jr.--------------------------- ---------------------------------Sheila Duffy William G. Buckles, Jr.455 N. Indian Rocks Road 455 N. Indian Rocks RoadBelleair Bluffs, FL 33770 Belleair Bluffs, FL 33770/s/ Craig Babcock /s/ Phil Palm--------------------------- ---------------------------------Craig Babcock Phil Palmc/o Desert Institute of Physical Therapy 455 N. Suite A15953 Greenway Hayden Belleair Bluffs, FL 33770Scottsdale, AZ 85260 First signature page to Stock Contribution Exchange Agreement/s/ Ray Juska /s/ Mike Barody--------------------------- ---------------------------------Ray Juska Mike Barody17 Marion Drive 5 Surcingle RoadEast Lynne, CT 06333 Queensbury, NY 12804/s/ Ron Basar---------------------------Ron Basar912 Shambliss LaneBuffalo Grove, ILNON-SHAREHOLDER LOAN HOLDERS/s/ Preston Whaley /s/ Clifford Chapman--------------------------- ---------------------------------Preston Whaley Clifford Chapman2043 79th Street W. P. O. Box 14760Bradenton, FL 34209 Bradenton, FL 34280-4760 Second signature page to Stock Contribution Exchange AgreementLIST OF APPENDICESCertificate of Designation Appendix 1.1 for Corniche Series C Preferred StockCertificate of Designation for Appendix 1.2 Corniche Series D Preferred StockSecurity Holdings of Strandtek and Exchange Appendix 2.1 RatiosForm of Supplemental Disclosure Appendix 3.1 AgreementForm of Guaranteed Note Appendix 5.6 1 [STRANDTEK INTERNATIONAL, INC. LETTERHEAD]February 11, 2002Mr. James FyfeSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Corniche Group Incorporated22 James's SquareLondon, England Re: Amendment and Waiver Stock Contribution Exchange AgreementDear Mr. Fyfe:This will confirm our conversations with respect to the Stock ContributionExchange Agreement dated January 7, 2002 between Corniche Group Incorporated("Corniche"), StrandTek International, Inc. ("StrandTek") and the PrincipalShareholders and Non-shareholder Loan Holders (the "Agreement"). Capitalizedterms used in this letter without definition shall have the respective meaningsgiven to them in the Agreement, and references to Section (s) without furtherdefinition shall be to the applicable Section(s) of the Agreement.You have advised us that to satisfy the financing contingency in the Agreement,you intended to commence a private placement seeking to sell 16,500,000 sharesof Corniche Common Stock at a price of 70(cent) per share. You have also shownus a draft of your private placement memo. Based on those numbers, and the timeneeded to complete the private placement and redeem the Corniche Series APreferred Stock, you would not have been able to satisfy the followingconditions in the Agreement:o the condition in Section 6.3.12 that there be no more than 39 million shares of Corniche Common Stock outstanding as of the Closing Date (excluding shares to be issued to the StrandTek Parties under the Agreement); ando the condition that the closing occur by January 30, 2002.You have indicated that you do not want to include in the private placementmemorandum a risk that the transaction may not be consummated on account of thefailure of these conditions to be satisfied, and we would not want that resulteither, as we still desire to proceed with the transaction contemplated by theAgreement. In light of the delay in the closing, we have further discussed andagreed that certain other modifications to the Agreement are appropriate, andCorniche and the StrandTek Parties have agreed to execute this letter agreementto evidence our agreement in regard to such modifications and changes. Accordingly, Corniche andthe StrandTek Parties have agreed to the following modifications and changes tothe Agreement:1. Corniche shall attempt to raise additional equity financing to bettercapitalize the combined enterprise after closing and accordingly the privateplacement shall be for a minimum of 16,500,000 shares and a maximum of23,500,000 shares of Corniche Common Stock, all at a price of $.70 per share.2. Any shares of Corniche Common Stock sold under the private placement at $.70per share in excess of the amount necessary for Corniche to satisfy Sections5.9.4 and 6.3.7 as reflected in the Agreement will not cause any increase in thenumber of shares of Corniche Common Stock or Corniche Series D Preferred Stockto be received by the StrandTek Parties under the Agreement, nor in any way beused or factored into the adjustment formula of Section 2.5 of the Agreement. Ofcourse, such issued and outstanding shares of Corniche Common Stock for purposesof the Section 2.5 adjustment shall include all shares of Corniche Common Stockissued or issuable in connection with the Agreement (other than those shares ofCorniche Common Stock to be issued to the StrandTek Parties) and pursuant to theprivate placement (other than those shares of Corniche Common Stock sold underthe private placement at $.70 per share in excess of the amount of such sharessold that are necessary to satisfy Sections 5.9.4 and 6.3.7 as reflected in theAgreement), and shall specifically include, without limitation, those shares ofCorniche Common Stock to be issued at Closing to Messrs. Fyfe, Harrison andCohen as reflected in Section 5.2 of the Corniche Disclosure Schedule and thoseshares of Corniche Common Stock contemplated to be issued to Cash Investors (butonly in the amount of shares sold necessary for Corniche to satisfy Sections5.9.4 and 6.3.7 as reflected in the Agreement) and Corniche's broker incident tothe private placement. Corniche further agrees that it shall also possess atSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Closing all of the net proceeds received from the sale of shares of CornicheCommon Stock that are not used or factored into the adjustment formula ofSection 2.5 of the Agreement pursuant to the foregoing provisions of thisparagraph.3. The Outside Date shall be extended to March 15, 2002, in order to allowenough time to consummate the private placement and effect the redemption of theSeries A Preferred Stock. The StrandTek Parties also agree to waive any defaultor condition precedent under Sections 5.11.9 and 6.3.12 (and other likeprovisions of the Agreement and Supplemental Disclosure Agreement), so long asat Closing there are no more than 47.5 million shares of Corniche Common Stockoutstanding (as computed after the issuance of all shares of Corniche CommonStock as contemplated in the Agreement and private placement, other than theStrandTek Parties under the terms of the Agreement).4. Corniche and the StrandTek Parties have further agreed that: (a) Corniche shall provide an additional $250,000 of interim financingto StrandTek promptly after the date of execution of this letter agreement, tobe evidenced by a promissory note in mutually agreeable form. StrandTek shalluse the proceeds of the loan for working capital and not for the repayment ofany sums due to Investor Loan Holders. -2- (b) The existing promissory note executed by StrandTek, among others,in favor of Corniche in the amount of $1,000,000 pursuant to Section 5.6 shallnot be due or payable until 45 days after the termination of the Agreement. (c) StrandTek shall not be required by reason of the Agreement to filea Form 10-KSB for its fiscal year ended September 30, 1998, and StrandTek shallbe required to file a Form 10-Q for its fiscal quarter ending December 31, 2000only in the event the Closing occurs and it is reasonably determined thatStrandTek is required to file such Form 10-Q. (d) Corniche agrees to waive any default or condition precedent underSection 6.2.7 (and other like provisions of the Agreement and SupplementalDisclosure Agreement) so long as the aggregate indebtedness at Closing ofStrandTek referenced in Section 6.2.7.1 is less than $35.5 million in theaggregate. Corniche further agrees that the StrandTek Parties shall be entitledto adjust the respective amount of principal to be repaid to each of theInvestor Loan Holders at Closing and contributed by each of the Investor LoanHolders in exchange for shares of Corniche Series C Preferred Stock, and theprovisions of Section 6.3.9 and Appendix 2.1 and like provisions of theAgreement and Supplemental Disclosure Agreement accordingly, so long as theaggregate principal amount of Investor Loans contributed to Corniche in exchangefor shares of Corniche Series C Preferred Stock equals $22 million. (e) Corniche agrees to waive any default or condition precedent underSections 5.10 and 6.2.8 (and other like provisions of the Agreement andSupplemental Disclosure Agreement), caused by StrandTek's issuance of additionalSeries A Warrants exercisable at $.41 per share (with an expiration date nolater than three (3) years from the date of issuance) to the PrincipalShareholders, Non-shareholder Loan Holders and others, so long as the aggregatenumber of StrandTek Series A Warrants outstanding at the Closing is not morethan 2,000,000 in the aggregate. Corniche further acknowledges and agrees thatsuch additional StrandTek Series A Warrants may be owned by the PrincipalShareholders, Non-shareholder Loan Holders and others at and subsequent to theClosing, and waives any default or condition precedent under the Agreement andSupplemental Disclosure Agreement associated therewith. (f) The last sentence of Section 6.2.7.1 shall be modified to now readas follows: "StrandTek and the Investor Loan Holders represent that the currentamount due with respect to the Investor Loans described above is as set forth inSection 3.2.3 of the StrandTek Disclosure Schedules." (g) Section 6.3.9 shall be modified by substituting the amount of $2.7million in place of the amount of $2.5 million referenced therein.5. The StrandTek Parties further recognize that the additional stock issuancesSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.permitted above would not leave sufficient authorized Corniche Common Stockavailable for Corniche to issue the "Key Holder's Percentage" of the 36,000,000shares to be issued to the StrandTek Parties pursuant to the Agreement atClosing. Accordingly, the StrandTek Parties and Corniche agree to decrease thenumber of shares of Corniche Common Stock to be received by the StrandTekParties under the Agreement by such number as they mutually determine at theClosing to be -3-reasonable, and the number of shares of Corniche Series D Preferred Stock tootherwise be received by the StrandTek Parties at Closing shall be appropriatelyincreased by 1% of the amount of any reduction of Corniche Common Stock underthis paragraph. Thus, by way of example and not in limitation, if the StrandTekParties receive 33,000,000 shares of Corniche Common Stock at Closing instead of36,000,000, the shares of Corniche Series D Preferred Stock to be received bythe StrandTek Parties as otherwise determined under the Agreement (as modifiedby this letter), would be further increased by the amount of 30,000 shares.It would be appreciated if Corniche would likewise execute and return a copy ofthis letter to Mr. Bauman on behalf of the StrandTek Parties to evidenceCorniche's agreement to the foregoing terms and provisions.Very truly yours,STRANDTEK INTERNATIONAL, INC.By: /s/ Jerome Bauman ------------------------------ Jerome Bauman, President/s/ William G. Buckles, Jr. -----------------------------------William G. Buckles, Jr./s/ Jerome Bauman -----------------------------------Jerome Bauman/s/ David Veltman -----------------------------------David Veltman/s/ Greg Veltman -----------------------------------Greg Veltman/s/ Jan Arnett-----------------------------------Jan Arnett/s/ Phil Palm-----------------------------------Phil Palm -4-/s/ Shiela Duffy -----------------------------------Sheila DuffySource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results./s/ Craig Babcock -----------------------------------Craig Babcock/s/ Mike Barody -----------------------------------Mike Barody/s/ Ron Basar -----------------------------------Ron Basar/s/ Ray Juska -----------------------------------Ray Juska/s/ Preston Whaley -----------------------------------Preston Whaley/s/ Clifford Chapman -----------------------------------Clifford ChapmanReviewed and agreed to this 11th day of Febraury, 2002CORNICHE GROUP INCORPORATEDBy: /s/ James Fyfe ------------------------------- James Fyfe, Chairman -5-Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. SUPPLEMENTAL DISCLOSURE AGREEMENT This Supplemental Disclosure Agreement (this "Agreement") ismade and entered into as of the 7th day of January, 2002, by and among CornicheGroup Incorporated, a Delaware corporation ("Corniche"), StrandtekInternational, Inc., a Delaware corporation ("Strandtek"), and Jerome Bauman,Jan Arnett, William G. Buckles, Jr., Phil Palm, David Veltman, Greg Veltman,Sheila Duffy, Craig Babcock, Ray Juska, Ron Basar and Mike Barody (collectively,the "Principal Shareholders") and Preston Whaley and Clifford Chapman (the"Non-shareholder Loan Holders"). For purposes of this Agreement, Jerome Bauman,William G. Buckles, Jr., David Veltman and Phil Palm may be collectivelyreferred to as the "Representing Shareholders". PRELIMINARY STATEMENTS A. Corniche has entered into a Stock Contribution ExchangeAgreement as of the date hereof (the "Exchange Agreement"), with Strandtek, thePrincipal Shareholders and the Non-shareholder Loan Holders whereby Cornicheshall acquire control of Strandtek through the acquisition of substantially allof the common stock of Strandtek from the Principal Shareholders and theInvestor Loans from the Investor Loan Holders on the terms set forth in theExchange Agreement, and whereby the Principal Shareholders, Non-shareholder LoanHolders, and Cash Investors shall acquire control of Corniche through thetransactions contemplated and referred to in the Exchange Agreement. B. The representations and warranties of Strandtek, thePrincipal Shareholders and the Investor Loan Holders set forth in this Agreementare incorporated in and made a part of the Exchange Agreement. C. The representations and warranties of Corniche set forth inthis Agreement are incorporated in and made a part of the Exchange Agreement. 1.0 Incorporation By Reference. The preliminary statements areincorporated in and made a part of this Agreement. This Agreement and theExchange Agreement shall be read together as one agreement. The capitalizedterms used but not defined in this Agreement shall have the same meaning as setforth in the Exchange Agreement. 2.0 Disclosure Documents. Prior to and simultaneous with the executionof this Agreement, Strandtek, on behalf of itself and its Subsidiary, StrandtekInternational, Inc., a Florida corporation ("Strandtek FL") (Strandtek FL,together with Strandtek, may be referred to herein collectively as the"Companies" and each individually as a "Company"), the Principal Shareholdersand the Investor Loan Holders have separately delivered and provided access toCorniche to various schedules, documents, information and agreements listedand/or summarized on the Strandtek Disclosure Schedule that was or is beingseparately delivered to Corniche (all such schedules, documents, information,agreements and disclosures set forth or listed on the Strandtek DisclosureSchedule may be hereinafter collectively referred to as the "StrandtekDisclosure Documents"), and all of the various items, matters, information,agreements and documents reflected or disclosed as a part of the StrandtekDisclosure Documents shall be deemed Previously Disclosed (as furtherhereinafter defined) to Corniche. Prior to and simultaneous with the executionof this Agreement, Corniche has separately delivered and provided access tovarious schedules, documents, information and agreements listed and/orsummarized on the Corniche Disclosure Schedule that was or is being separatelydelivered to Corniche (all such schedules, documents, information, agreementsand disclosures set forth in this Corniche Disclosure Schedule may behereinafter collectively referred to as the "Corniche Disclosure Documents") andall of the various items, matters, information, agreements and documentsreflected or disclosed as a part of the Corniche Disclosure Documents shall bedeemed Previously Disclosed (as further hereinafter defined) to Strandtek, thePrincipal Shareholders and the Investor Loan Holders. Any item, matter,disclosure, information, schedule, agreement or document (including mattersreflected in any such documents and agreements) listed and/or set forth in theStrandtek Disclosure Schedule or Corniche Disclosure Schedule, regardless ofwhat section, if any, of this Agreement is referenced by such item, matter,disclosure, information, schedule, agreement or document, shall be deemedSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results."Previously Disclosed" for all purposes of this Agreement and the ExchangeAgreement, notwithstanding anything contained in this Agreement or the ExchangeAgreement to the contrary, and shall not be a basis for any claimed breach ofany representation, warranty, covenant or agreement made by the Companies, thePrincipal Shareholders, the Investor Loan Holders or Corniche, as applicable,pursuant to this Agreement and/or the Exchange Agreement, provided however, if asection of the Strandtek Disclosure Schedule or Corniche Disclosure Schedule isprovided in response to a specific representation contained herein, such sectionof the Strandtek Disclosure Schedule or the Corniche Disclosure Schedule, asapplicable, must identify with reasonable specificity (including bycross-reference) all disclosures required to make such representation accuratenotwithstanding any documents or information "Previously Disclosed." Further,any item, matter, disclosure, information, agreements and documents contained inthe Strandtek SEC Documents (including the draft SEC Documents provided toCorniche that are contemplated to be filed by Strandtek) or the Corniche SECDocuments (including the draft of the SEC Document provided to Strandtek that iscontemplated to be filed by Corniche) (each as further defined below) shall bedeemed Previously Disclosed, and likewise shall not be a basis for any claimedbreach of any representation or warranty made by the Companies, the PrincipalShareholders, the Investor Loan Holders, or Corniche pursuant to this Agreement. 3.0 Representations and Warranties Regarding Strandtek. Subject to theforegoing terms and provisions of this Agreement and the Previously Disclosedinformation, Strandtek and the Representing Shareholders, severally and notjointly, hereby represent and warrant to Corniche as follows: 3.1 Organization and Qualification. 3.1.1 Strandtek is a corporation duly organized, validly existing andin good standing under the laws of the State of Delaware, and Strandtek FL is acorporation duly organized, validly existing and in good standing under the lawsof the State of Florida. Each of the Companies has the power and authority toown, lease and operate their properties and to conduct their business aspresently conducted (the "Business"). Each of the Companies are duly qualifiedto transact business as foreign corporations and are in good standing in eachjurisdiction in which the conduct of such Company's business or the ownership,leasing or operation of their property requires such qualification, except forfailures to be so qualified or in -2-good standing which would not, singly or in the aggregate with all such otherfailures, have a Strandtek Material Adverse Effect. None of the Companies is inviolation of any of the provisions of such Company's Articles of Incorporation,as amended, or by-laws, as amended, or similar governing documents. True andcomplete copies of each of the Companies' Articles of Incorporation and by-laws,as currently in effect, have previously been delivered to Corniche. 3.1.2 Prior to the date hereof, Corniche has been given access to trueand complete copies of all of each of the Companies' minute books, includingminutes of meetings of and resolutions adopted by the Board of Directors andshareholders of each of the Companies to the extent the same are available tosuch Company. There are no other material minutes or resolutions which have beenadopted by the Board or shareholders of either of the Companies. Copies of anymaterial minutes or resolutions adopted after the date of execution of theExchange Agreement and prior to the Closing contemplated therein shall beprovided to Corniche prior to the Closing. 3.1.3 Except as listed in Section 3.1.3 of the Strandtek DisclosureSchedule, none of the Companies is a party to any stock purchase agreement,registration rights agreement, shareholders' agreement, voting rights agreement,investor agreement, stock option agreement, warrant or other agreement requiringthe issuance of any shares of such Company's capital stock (other thancertificates for shares reflected on Appendix 2.1 of the Exchange Agreement thatremain to be issued). To each of the Companies' and Representing Shareholder'sknowledge, there are no shareholder or voting agreements or similar agreementsamong the shareholders of such Company in their capacities as such. 3.2 Capitalization; Funded Debt.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 3.2.1 Section 3.2.1 of the Strandtek Disclosure Schedule sets forth (a)the number of shares of each class and series of capital stock of each of theCompanies which are authorized for issuance, (b) as of the date hereof, thenumber of such shares that are outstanding and (c) a copy of such Company'sshareholder list, as well as a list of shares of capital stock of each of theCompanies issuable to any Person that is not reflected on such shareholder list.All of such outstanding and issuable shares are presently, or when issued willbe, validly issued, fully paid and non-assessable. No shares of any of theCompanies' capital stock possess or are subject to preemptive rights or rightsof first refusal and no shares have been issued in violation of any preemptiverights or rights of first refusal. Except as Previously Disclosed, no shares ofeither of the Companies' capital stock are held in such Company's treasury. Itis recognized and agreed that certificates for certain shares of capital stockof Strandtek may be issued subsequent to the date of execution of this Agreementfor shares reflected on Appendix 2.1 of the Exchange Agreement that remain to beissued and it is agreed that Section 3.2.1 of the Strandtek Disclosure Scheduleshall be updated for such issuances immediately prior to the Closing ifnecessary (in other words, to the extent such shares are not already reflectedin Section 3.2.1 of the Strandtek Disclosure Schedule). 3.2.2 Section 3.2.2 of the Strandtek Disclosure Schedule lists, foreach Person and benefit plan adopted by each of the Companies who owns anywarrants, options or rights to purchase any shares of the capital stock of suchCompany, the number owned and a description thereof, the class and series ofshares issuable upon exercise of such warrants, options or rights, -3-and the number of shares subject to such warrants, options or rights, thevesting date (if applicable), expiration date, and exercise price applicablethereto. Except as set forth in Section 3.2.2 of the Strandtek DisclosureSchedule, none of the Companies has outstanding any subscriptions, options,rights, warrants, convertible securities or other agreements or commitments toissue, or contracts or any other agreements obligating such Company to issue, orto transfer from treasury, any shares of capital stock of such Company of anyclass or kind, or securities convertible into such capital stock of suchCompany. It is recognized and agreed that certain changes may occur in theinformation initially contained in Section 3.2.2 of the Strandtek DisclosureSchedule, and accordingly Section 3.2.2 of the Strandtek Disclosure Scheduleshall be updated to reflect any change in the information contained thereonimmediately prior to the Closing. 3.2.3 Except as reflected on the Current Balance Sheet (as defined inSection 3.22.1 hereafter), and for changes occurring after September 30, 2001,none of the Companies have any term or funded debt, debt to banks or debt toAffiliates. To each of the Companies' knowledge, except as Previously Disclosed,if applicable, no event has occurred which (whether with or without notice,lapse of time or the happening or occurrence of any other event) wouldconstitute a default by such Company which has not been cured or waived underany agreement or other instrument relating to any funded debt, bank loan or debtto Affiliates. Section 3.2.3 of the Strandtek Disclosure Schedule accuratelysets forth the Companies' debt to banks, debt for borrowed money and debt toAffiliates as of the date hereof. 3.2.4 None of the Companies is a guarantor of the obligations of anyPerson (other than the other Company) except as set forth on Section 3.2.4 ofthe Strandtek Disclosure Schedule. 3.2.5 There are no accrued, declared, or unpaid dividends on any sharesof any of the Companies' capital stock. 3.3 Subsidiaries; Acquisitions; Dispositions. 3.3.1 Except for Strandtek's ownership and control of Strandtek FL,none of the Companies currently, directly or indirectly own or control anySubsidiary; provided, however, for purposes of the foregoing and this Agreement,it is recognized and agreed that Strandtek owns a controlling interest in thatcertain entity known as Strandtek West, Inc., a Washington corporation, that hasbeen involuntarily dissolved and is no longer engaged in active business. Forpurposes of this Agreement, Strandtek West, Inc. shall not be deemed aSubsidiary or otherwise affect or be involved in any of the representations andSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.warranties contained in this Agreement. 3.3.2 Except for Strandtek's ownership of the capital stock ofStrandtek FL, none of the Companies currently, directly or indirectly (i) own ofrecord or beneficially (A) any shares of capital stock or securities convertibleinto capital stock of any other corporation or (B) any equity interest in anypartnership, joint venture, limited liability company or other businessenterprise or (ii) own or control through any means any other entity. 3.3.3 Except for the Management Agreement (as described in Section3.3.3 of the Strandtek Disclosure Schedule), the economic and various otherterms of which are summarized -4-in Section 3.3.3 of the Strandtek Disclosure Schedule, there are no agreementsbetween any of the Companies and any third party relating to the operation,governance, ownership or other material aspect of any other business enterprise. 3.4 Taxes. 3.4.1 Each of the Companies has previously provided to Corniche copiesof all Tax (as hereinafter defined) returns filed by such Company and itsSubsidiaries from January 1, 1997 through the date of execution of thisAgreement. Except as Previously Disclosed, no Tax returns have been audited orare the current subject of an audit by any federal or state authority. It hasbeen disclosed to Corniche that the Companies are not current with respect toall of their tax return filing obligations, and that the last federal income taxreturns filed by the Companies was with respect to their fiscal year endedSeptember 30, 1999. 3.4.2 For purposes of this Agreement, the terms "Tax" or "Taxes" shallinclude any of the following imposed by or payable to any GovernmentalAuthority: any income, gross receipts, license, payroll, employment, excise,severance, stamp, business, occupation, premium, windfall profits, environmental(including taxes under Section 59A of the Code), capital stock, franchise,profits, withholding, social security (or similar), unemployment, disability,real property, personal property, sales, use, transfer, registration, or valueadded tax, any alternative or add-on minimum tax, any estimated tax, and anylevy, impost, duty, assessment, withholding or any other governmental charge ofany kind whatsoever, in each case including any interest, penalty, or additionthereto, whether disputed or not. 3.4.3 Each of the Companies (i) has complied in all material respectswith all applicable laws, rules and regulations relating to the payment andwithholding of Taxes from the wages or salaries of employees and independentcontractors, (ii) has paid over to the proper governmental authorities allamounts required to be so withheld and (iii) is not liable for any Taxes forfailure to comply with such laws, rules and regulations. 3.4.4 None of the Companies is a party to any agreement that providesfor the payment of any amount that, if paid, would be nondeductible (in whole orin part) pursuant to Section 280G of the Code in connection with theconsummation of the transactions contemplated by the Exchange Agreement orotherwise. 3.4.5 Except as Previously Disclosed, all of any of the Companies'Taxes have been paid in full to the appropriate governmental authorities orfully accrued or provided for with respect to fiscal periods covered by thefinancial statements described in Section 3.22 of this Agreement other than anyliability for unpaid Taxes that may have accrued since September 30, 2001 inconnection with the operation of the Business by such Company in the ordinarycourse. Each of the Companies have or will prepare and file with the appropriateGovernmental Authorities (as defined in Section 3.19.4) all returns and reportswith respect to franchise, income and all other Taxes required to be filed bysuch Company at or before the Closing Date. All Tax returns were (or in the caseof Tax returns to be filed subsequent to the date hereof, will be) correct andcomplete in all material respects when filed. -5-Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 3.4.6 No assessments or additional Taxes have been proposed orthreatened against any of the Companies or any of such Company's assets. To thebest of each of the Companies' knowledge, there are no pending investigations ofsuch Companies or their Tax returns by any taxing authority, and there are noTax Liens on any of such Companies' assets other than Liens for Taxes not yetdue and payable. 3.5 Other Business Names. Each of the Companies has PreviouslyDisclosed each business name or registered trade name currently used by suchCompany in connection with such Company's business, and each jurisdiction, ifany, in which any such name is registered. 3.6 Owned Real Property. None of the Companies owns any real property. 3.7 Leased Real Property. Each of the Companies has previouslydelivered to Corniche true and complete copies of all leases pursuant to whichsuch Company leases any real estate (the "Strandtek Real Property Leases"). Toeach of the Companies' knowledge, such Company is not in default in any materialrespect under the Strandtek Real Property Leases, and such Company is not awareof any facts which, with notice and/or the passage of time, would constitutesuch a default. The possession of the applicable real property by each of theCompanies under the Strandtek Real Property Leases has not been disturbed and,to each of the Companies' knowledge, no claim has been asserted against suchCompany which is materially adverse to its rights in such leasehold interests.Except as Previously Disclosed, none of the Companies is subletting any buildingunder any of the Strandtek Real Property Leases or any part thereof. Except asreflected in the Strandtek Real Property Leases, consummation of thetransactions contemplated by the Exchange Agreement will not constitute anassignment, sublease or default under the Strandtek Real Property Leases. 3.8 Proprietary Rights. 3.8.1 Each of the Companies has Previously Disclosed to Corniche all ofsuch Company's (a) registrations of trademarks and other marks, rights to allother trademarks and other marks, trade names or other trade rights that relateto such Company's Business, (b) pending applications for any such registrationsthat relate to such Company's Business, (c) rights in or to patents andcopyrights and all pending applications therefor that relate to such Company'sBusiness and (d) rights, other than software licenses generally available to thepublic, to all other trade secrets, designs, plans, specifications, technology,methods, designs and other proprietary rights, whether or not registered, thatrelate to such Company's Business (all of the items in the preceding clauses (a)through (d), collectively, the "Strandtek Proprietary Rights"). To each of theCompanies' knowledge, such Company has the perpetual right to use the StrandtekProprietary Rights and no person or entity has a right to receive a royalty orsimilar payment in respect of any Strandtek Proprietary Rights whether pursuantto any contractual arrangements entered into by such Company or otherwise.Except as Previously Disclosed, none of the Companies has any licenses grantedby or to it relating to any of the Strandtek Proprietary Rights, other thansoftware licenses, each of which is generally available to the public for a fee,granted to such Company incident to the operation of its Business. To each ofthe Companies' knowledge, none of such Strandtek Proprietary Rights, nor suchCompany's use thereof, infringe or otherwise violate the rights of any thirdparty. No proceedings have been instituted against or, notices received byeither of the Companies that are presently outstanding alleging that such -6-Company's use of the Strandtek's Proprietary Rights infringe or otherwiseviolate any rights of a third party. None of the Companies has any knowledge ofany infringement or violation of any of such Company's rights in or to theStrandtek Proprietary Rights used by either of the Companies or the production,provision or sale of any services or products by such Company, and, to suchCompany's knowledge, there is no basis for any such claim. 3.8.2 All employees of each of the Companies who have contributed tothe development of any of the Strandtek intellectual property owned by suchCompany have entered into valid and binding agreements with such Companysufficient to vest title in such Company to all intellectual property created bysuch employee in the scope of his or her employment with such Company. Thecurrent template of the proprietary rights agreement that such Company uses inSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.its Business has been Previously Disclosed to Corniche. 3.9 Brokerage. No broker or finder has rendered services to any of theCompanies or to the knowledge of the Companies and Representing Shareholders, toany shareholder of Strandtek in connection with the Exchange Agreement or thetransactions contemplated thereby. There are no other agreements executed by anyof the Companies which will obligate such Company or any of its successors orAffiliates to pay any brokerage or finder's fee in the future with respect toany type of commercial, corporate, financial, acquisition, banking, borrowing orother business transaction, or to use any Person in connection with any of theforegoing. It is recognized and agreed that Corniche has retained and agreed topay a fee to Bobby Cohen of Robert M. Cohen & Company, Inc. for servicesrendered to Corniche in connection with this transaction. 3.10 Accounts Receivable. All of the accounts receivable of each of theCompanies has originated in the ordinary course of the business of such Company,are valid, and to such Company's knowledge, are fully collectible (subject toreserves reflected in the Current Balance Sheet as defined in Section 3.22) andare not subject to any defense, counterclaim or setoff, except to the extent ofany such reserve. No such account receivable has been factored or pledged otherthan to banks providing loans to the Companies. 3.11 Title to Tangible Assets. Each of the Companies has good andmarketable title in and to all of the tangible assets of such Company's Businessreflected in the Current Balance Sheet plus all tangible assets purchased bysuch Company since the date of the Current Balance Sheet, less all tangibleassets which such Company has disposed of in the ordinary course of businesssince the date of the Current Balance Sheet, which tangible assets are free andclear of any Liens except as otherwise disclosed in the next sentence. The onlyLiens of the Companies which exist and at the Closing will exist on the tangibleassets of the Companies are Liens which either (a) secure liabilities disclosedin the Current Balance Sheet or arise in the ordinary course of Businesssubsequent to the date of the Current Balance Sheet, (b) secure the ownershipinterests of lessors of equipment used in the Business and Previously Disclosed,(c) are Liens for Taxes, assessments, governmental charges, or labor ormaterial, (d) are Liens arising under the Strandtek Real Property Leases, or (e)as set forth on Section 3.11 of the Strandtek Disclosure Schedule. 3.12 Material Contracts; Related Parties. -7- 3.12.1 Except as Previously Disclosed, as of the date hereof none ofthe Companies is bound by any material contract to be performed after the datehereof (including any employment, termination or consulting contract, agreement,arrangement or understanding (whether written or oral)). Except as PreviouslyDisclosed, to each of the Company's knowledge, such Company has fulfilled allmaterial obligations required pursuant to such contracts to have been performedby such Company on its part prior to the date of this Agreement, and all partiesto such contracts with such Company are in substantial compliance and no eventhas occurred which, through the giving of notice or the passage of time or both,would cause or constitute a material default under any such contracts or wouldcause the acceleration of any obligation of any party thereto. 3.12.2 Except as Previously Disclosed, none of the Companies has anyoutstanding loans or advances to or from any Person or are obligated to make orto take any such loans or advances, except for advances to its employees inrespect of reimbursable business expenses anticipated to be incurred by them inconnection with their performance of services for such Company. Except for anyobligation of one of the Companies for an obligation of another of theCompanies, none of the Companies has assumed, guaranteed, endorsed or otherwisebecome directly or contingently liable on any indebtedness of any other Person(including liability by way of agreement, contingent or otherwise, to purchase,to provide funds for payment, to supply funds to or otherwise invest in the debtof another Person or otherwise to assure the creditor against loss), except forguarantees by endorsement of negotiable instruments for collection in theordinary course of business. 3.12.3 Except as Previously Disclosed (including transactions reflectedon the books and records of the Companies provided or made available to Cornicheas part of the Strandtek Disclosure Documents), there have been no transactionsduring the last three years between either of the Companies and any director,Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.officer, employee, shareholder or Affiliate of either Company other thantransactions relating to the employment or shareholdings (including increasestherein and any related share and warrant issuances and exercises) of any suchPerson. 3.13 Customers and Suppliers. Except as set forth on Section 3.13 ofthe Strandtek Disclosure Schedule, to each of the Companies' knowledge, none ofthe Companies' top ten customers for the fiscal years ended September 30, 2001and 2000 has terminated or materially changed in an adverse manner, or givennotice that it intends to terminate or materially change in an adverse manner,its relationship with such Company since September 30, 2001 or 2000,respectively. 3.14 Labor Matters. 3.14.1 None of the Companies is a party to any collective bargainingagreement. Since January 1, 1999, none of the Companies has had any strike,slowdown, picketing, work stoppage, material labor dispute or threat of amaterial labor dispute or any attempt or threat of an attempt by a labor unionto organize its employees. 3.14.2 Each of the Companies has Previously Disclosed all currentwritten employment or consulting contracts with, and covenants againstcompetition by, any Person employed by such Company presently or within the lastyear. True and correct copies of all such written agreements have been deliveredto Corniche prior to the date hereof. -8- 3.14.3 No suit is currently pending, or to each of the Company'sknowledge is being threatened, by any former employee alleging wrongfultermination, breach of an employment agreement, discrimination or any claim forany payment from such Company. 3.15 Employee Benefit Plans. 3.15.1 All "employee benefit plans" within the meaning of Section 3(3)of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),covering employees or former employees of each of the Companies (the "StrandtekEmployees") have been Previously Disclosed, and true and complete copies thereofhave been made available to Corniche. 3.15.2 Except as Previously Disclosed, (a) to each of the Companies'and the Representing Shareholders' knowledge, all employee benefit planscovering Strandtek Employees, to the extent subject to ERISA (the "StrandtekERISA Plans"), are and have been in compliance with ERISA, including Section404(a)(1) thereof; (b) to each of the Companies' and the RepresentingShareholders' knowledge, each Strandtek ERISA Plan which is an "employee pensionbenefit plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") andwhich is intended to be qualified under Section 401(a) of the Code, has either(1) received a favorable determination letter from the Internal Revenue Service(the "IRS"), or (2) is or will be the subject of an application for a favorabledetermination letter, and none of the Companies is aware of any circumstanceslikely to result in the revocation or denial of any such favorable determinationletter, (c) there is no pending or, to each of the Companies' and theRepresenting Shareholders' knowledge, threatened litigation or administrativeaction relating to the Strandtek ERISA Plans, and (d) to each of the Companies'and the Representing Shareholders' knowledge, such Company has not engaged in atransaction with respect to any Strandtek ERISA Plan that, assuming the taxableperiod of such transaction expired as of the date hereof, would subject suchCompany to a tax or penalty imposed by either Section 4975 of the Code orSection 502(i) of ERISA. 3.16 Insurance. Each of the Companies has Previously Disclosed allinsurance policies which such Company currently has in effect, and the status ofany unpaid claims thereunder. True and correct copies of such insurance policieshave been made available to Corniche. All premiums due and payable under allsuch policies have been paid and, to each of the Companies' and the RepresentingShareholders' knowledge, such Company is otherwise in compliance in all materialrespects with the terms and conditions of all such policies. 3.17 Licenses and Permits. Each of the Companies have all licenses,Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.permits, orders, approvals and authorizations required for the conduct of theBusiness as presently conducted and as contemplated to be conducted. None of theCompanies has received any notice of investigation, evaluation or suspension ofany such licenses, permits, orders, approvals or authorizations. To each of theCompanies' and the Representing Shareholders' knowledge, no suspension orcancellation of any such licenses, permits, orders, approvals or authorizationshas been threatened or is contemplated. 3.18 Authority Relative to the Exchange Agreement; Enforceability. Theexecution, delivery and performance of this Agreement and the Exchange Agreementby Strandtek are within the corporate power and authority of Strandtek and havebeen duly authorized by all requisite corporate action on the part of Strandtek.Assuming due authorization, execution and -9-delivery of this Agreement and the Exchange Agreement by Corniche, the PrincipalShareholders and Non-shareholder Loan Holders, this Agreement and the ExchangeAgreement are legal, valid and binding obligations of Strandtek, enforceableagainst Strandtek in accordance with their respective terms, except insofar astheir enforcement may be limited by (a) bankruptcy, insolvency, moratorium orsimilar laws affecting the enforcement of creditors' rights generally and (b)equitable principles limiting the availability of equitable remedies. Allpersons who executed this Agreement or the Exchange Agreement on behalf ofStrandtek have been duly authorized to do so. 3.19 Compliance with Other Instruments; Consents. All steps taken andto be taken by Strandtek and its Board of Directors in connection with thetransactions contemplated by the Exchange Agreement, are in accordance with allapplicable provisions of Strandtek's Certificate of Incorporation, by-laws andother corporate governance documents to which Strandtek is subject. Neither theexecution and delivery of this Agreement or the Exchange Agreement by Strandtek,nor the consummation of the transactions contemplated hereby or thereby will: 3.19.1 conflict with, or result in a breach of any provision of,Strandtek's Certificate of Incorporation or by-laws; 3.19.2 to each of the Companies' and Representing Shareholders'knowledge (and assuming all required third party consents and approvals ofcontracts, loans, leases, etc. listed in response to Section 3.19.4 below and onSection 3.19.2 of the Strandtek Disclosure Schedule are obtained), violate, orconflict with, or result in a breach of any provision of, or constitute adefault (or an event which, with the giving of notice, the passage of time orotherwise, would constitute a default) under, or entitle any party (with thegiving of notice, the passage of time or otherwise) to terminate, accelerate,modify or call a default under, or result in the creation of any lien, securityinterest, charge or encumbrance upon any of the properties or assets of suchCompany under, any of the terms, conditions or provisions of any note, bond,mortgage, indenture, deed of trust, license, contract, undertaking, agreement,lease or other instrument or obligation to which such Company is a party; 3.19.3 to each of the Companies' and Representing Shareholders'knowledge, violate any order, writ, injunction, decree, statute, rule orregulation applicable to such Company, its properties or its assets; or 3.19.4 require any action or consent or approval of, or review by, orregistration or filing by any of the Companies or any of such Company'sAffiliates with, any national, federal, state, provincial, county, municipal orlocal government, foreign or domestic, or the government of any politicalsubdivision of any of the foregoing, or any entity, authority, agency, ministryor other similar body exercising executive, legislative, judicial, regulatory oradministrative authority or functions of or pertaining to government and anyauthority or other quasi-governmental entity established to perform any of suchfunctions (each a "Governmental Authority"), other than registrations, filingsor other actions required under federal and state securities laws; except, inthe case of Sections 3.19.2, 3.19.3 and 3.19.4, for any of the foregoing that,individually or in the aggregate, is or are not material to the Companies, takenas a whole, and would not materially and adversely affect the ability of theParties hereto to consummate the transactions contemplated by the ExchangeAgreement.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. -10- 3.20 Compliance with Applicable Laws. Except as Previously Disclosed,to Strandtek's and the Representing Shareholder's knowledge, each of theCompanies is in compliance in all material respects with all statutes, laws,rules, regulations, orders and ordinances relating to the conduct of itsBusiness, and such Company has not received any notice or advice to thecontrary. 3.21 Environmental Compliance. 3.21.1 There are no pending or, to each of the Companies' and theRepresentative Shareholder's knowledge, threatened actions or claims againsteither Company arising out of the presence or release into the environment ofany chemicals, pollutants or contaminants relating to the operations of suchCompany or arising in connection with any properties owned by it or as to whichsuch Company is or could be a potentially responsible party under applicablelaw, which individually or in the aggregate would have a Strandtek MaterialAdverse Effect. 3.21.2 Each of the Companies is in compliance in all material respectswith all Environmental Laws. Each Company has not been alleged to be inviolation of, nor has such Company been subject to any administrative orjudicial proceeding pursuant to, any Environmental Laws (as hereinafter defined)at any time during the past three years. 3.21.3 Except as set forth on Section 3.21.3 of the StrandtekDisclosure Schedule, there are no facts or circumstances known to any of theCompanies or Representative Shareholders that could reasonably form the basisfor the assertion of any claim against such Company pursuant to anyEnvironmental Laws, including any claim arising from such Company's past orpresent practices. 3.21.4 Each of the Companies has all material permits, approvals andconsents under all applicable Environmental Laws to operate its businesseslawfully including water discharge permit. 3.21.5 There have been no Regulated Substances (as hereinafter defined)generated, transported, Released (as hereinafter defined) or disposed of by anyof the Companies during the past three years except in the ordinary course ofbusiness in accordance with Environmental Laws. 3.21.6 For purposes of this Agreement: 3.21.6.1 "Regulated Substance" means any pollutant, chemical substance,hazardous waste, hazardous substance or contaminant regulated under anyEnvironmental Law. 3.21.6.2 "Releasing" means releasing, spilling, leaking, pumping,pouring, emitting, emptying, discharging, injecting, escaping, leaching,disposing or dumping. 3.21.6.3 "Environmental Law" means all applicable laws and regulationsrelating to pollution control and environmental contamination, including lawsand regulations governing the generation, use, collection, treatment, storage,transportation, recovery, removal, discharge, or disposal of RegulatedSubstances and all laws and regulations with regard to record-keeping,notification and reporting requirements respecting Regulated Substances. -11- 3.22 Financial Statements. 3.22.1 The following annual and interim financial statements of theCompanies have been previously delivered to Corniche: the audited consolidatedbalance sheets of the Companies as of September 30, 2000 and 1999, the relatedaudited consolidated statements of income, changes in shareholders' equity andcash flows of the Companies for the fiscal years ended September 30, 2000 and1999 (collectively, the "Audited Financial Statements"), the unauditedconsolidated balance sheet of the Companies as of September 30, 2001 (theSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results."Current Balance Sheet") and the unaudited consolidated statements of income ofStrandtek for the year ended September 30, 2001(the "Unaudited FinancialStatement"). The Audited Financial Statements fairly present the financialcondition of the Companies and the results of operations and cash flows as ofthe dates and for the periods to which they apply, as the case may be, and suchstatements have been prepared in conformity with GAAP. The Unaudited FinancialStatements were prepared from the books and records of the Companies and aretrue, complete and correct in all material respects, and the normal auditadjustments required in connection therewith will not be material in amount oreffect. 3.22.2 Since January 1, 1999 no unrecorded funds or assets of any ofthe Companies has been established for any purpose; no accumulation or use ofsuch Company's funds has been made without being properly accounted for in suchCompany's books and records; all payments by or on behalf of any of theCompanies have been duly and properly recorded and accounted for in its booksand records; no false or artificial entry has been made in such Company's booksand records for any reason; no payment has been made by or on behalf of any ofthe Companies with the understanding that any part of such payment is to be usedfor any purpose other than that described in the documents, if any, supportingsuch payment; and none of the Companies has made, directly or indirectly, anyillegal contributions to any political party or candidate, either domestic orforeign, or any contribution, gift, bribe, rebate, payoff, influence payment orkickback, whether in cash, property or services, to any Person to securebusiness or to pay for business secured by such Company. 3.22.3 Except as set forth in Section 3.22.3, the Current Balance Sheetincludes accruals for all amounts due but not paid as of the date thereof underall taxation laws (other than current year applicable franchise taxes) inaccordance with GAAP, and accruals for vested vacation entitlement and forholiday and sick pay in accordance with GAAP. 3.22.4 None of the Companies has incurred any liabilities orobligations of any nature (whether accrued, unaccrued, absolute, contingent,threatened, unknown or otherwise) which would be required to be included in abalance sheet prepared in accordance with GAAP, except (a) as reflected on theCurrent Balance Sheet, (b) for liabilities and obligations incurred in theordinary course of business consistent with past practice since the date of theCurrent Balance Sheet, (c) liabilities and obligations which have arisen inconnection with the Exchange Agreement and this Agreement and the transactionscontemplated therein and herein, and (d) additional loans from shareholders andInvestor Loan Holders of Strandtek to the Companies, each as set forth onSection 3.2.3 of the Strandtek Disclosure Schedule as of the date hereof. 3.23 Litigation. Except as set forth on Section 3.23 of the StrandtekDisclosure Schedule, there are no legal, administrative, arbitration or otherproceedings or claims pending or, to each of the Companies' and theRepresentative Shareholders knowledge, threatened, -12-against such Company, nor are any of the Companies subject to any existingjudgment nor have any of the Companies received any inquiry from anyGovernmental Authority about the transactions contemplated by the ExchangeAgreement, or about any violation or possible violation of any law orregulation. Prior to the date hereof, each of the Companies has provided toCorniche's counsel a copy of all letters received by such Company's accountantsfrom counsel to such Company since December 31, 1998 with respect to pending orthreatened legal, administrative, arbitration or other proceedings. 3.24 Adverse Business Changes. Except as set forth on Section 3.24 ofthe Strandtek Disclosure Schedule, since September 30, 2001, there has not been: 3.24.1 Any change in any of the Companies' Business that would bereasonably likely to have, individually or in the aggregate, a StrandtekMaterial Adverse Effect; 3.24.2 Any material damage or loss to any material asset or property ofany of the Companies, regardless of insurance; 3.24.3 Except for additional loans by banks and shareholders to theCompanies set forth on Section 3.2.3 of the Strandtek Disclosure Schedule as ofSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.the date hereof, any disposition, mortgage, pledge, or subjection to any Lien(other than as contemplated by the last sentence of Section 3.11), claim, chargeor option on any property or asset of either of the Companies, any commitmentmade or liability incurred by either of the Companies, or any cancellation orcompromise of any debt or claim of either of the Companies, otherwise than inthe ordinary course of business; 3.24.4 Any dividend or distribution declared, set aside or paid inrespect of any of the Companies' capital stock or any repurchase by such Companyof shares of its capital stock; 3.24.5 Any employment contract not terminable at will without cost(except for normal salary) beyond the effective date of termination entered intoby any of the Companies; or any increase or decrease in the rates ofcompensation payable by any of the Companies to any of its officers, directors,employees or agents, other than general increases to personnel made inaccordance with past practices; or, any declaration, payment, commitment, orobligation of any kind for the payment by any of the Companies of any bonus,other than bonuses paid in the ordinary course of business; or anyimplementation, modification, amendment or termination of any retirement,termination, severance or other benefits to officers, directors, employees oragents of any of the Companies; 3.24.6 Any amendment, termination or threatened termination of anymaterial contract, agreement, insurance policy, plan, lease, or license to whichany of the Companies is a party or by which such Company may be bound, otherwisethan in the ordinary course of business; 3.24.7 Any material change in any of the Companies' methods of doingbusiness; 3.24.8 Any distribution or disposition of assets other than in theordinary course of business; -13- 3.24.9 Any loss or, to any of the Companies' knowledge, any threatenedloss of a customer which is designated as a "large customer" pursuant to Section3.13.1; 3.24.10 Any termination of any permit or license issued to any of theCompanies upon which a material portion of the Business is dependent; or 3.24.11 Any statute, order, judgment, writ, injunction, decree, permit,rule or regulation of any court or any Governmental Authority adopted or enteredor proposed to be adopted or entered which may reasonably be expected tomaterially and adversely affect any of the Companies' property or business,except as affects business generally in the United States or Illinois orFlorida. 3.25 Strandtek SEC Documents and Other Public Disclosures. Strandtekhas provided to Corniche drafts of its annual reports on Form 10-K for thefiscal years ended September 30, 2000, 1999 and 1998. Strandtek will file suchdocuments along with the other documents contemplated in the Exchange Agreement,with the SEC within the time frame contemplated in the Exchange Agreement. 3.26 Full Disclosure. The Previously Disclosed information provided toCorniche by each of the Companies or any of such Company's representativesduring Corniche's examination of the business, affairs, results of operationsand financial condition of such Company and its Subsidiaries taken as a wholedid not contain any untrue statement of a material fact or omit to state anymaterial fact necessary in order to make the statements made therein, in lightof the circumstances in which they were made, not misleading. No representationor warranty made in this Agreement, and no certification furnished or to befurnished by any of the Companies pursuant to this Agreement, contains or willcontain any untrue statement of a material fact or omits, or will omit, to statea material fact necessary to make the statements contained herein or therein notmisleading. 4.0 Each Principal Shareholder and Investor Loan Holder, severally andnot jointly, and solely as to himself, represents and warrants to Corniche asfollows:Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 4.1 Authorization. Such Principal Shareholder or Investor Loan Holderhas full power and authority to execute and deliver this Agreement and theExchange Agreement and to perform his obligations hereunder and thereunder.Assuming due authorization, execution and delivery of this Agreement and theExchange Agreement by Corniche, StrandTek and the other parties, each of thisAgreement and the Exchange Agreement has been duly executed and delivered bysuch Principal Shareholder or Investor Loan Holder and each constitutes a validand binding agreement of such Principal Shareholder or Investor Loan Holder,enforceable against such Principal Shareholder or Investor Loan Holder inaccordance with its terms, except insofar as their enforcement may be limited by(a) bankruptcy, insolvency, moratorium or similar laws affecting the enforcementof creditors' rights generally and (b) equitable principals limiting theavailability of equitable remedies. Such Principal Shareholder or Investor LoanHolder is not suffering from an impairment or other disability, legal, physical,mental or otherwise, that would preclude or limit the ability of such PrincipalShareholder or Investor Loan Holder to execute this Agreement or the ExchangeAgreement or perform his respective obligations hereunder or thereunder. -14- 4.2 Non-contravention. Neither the execution and delivery of thisAgreement and the Exchange Agreement nor the performance by such PrincipalShareholder or Investor Loan Holder of his obligations hereunder or thereunderwill (i) violate or result in a breach (with or without the lapse of time, thegiving of notice or both) of or constitute a default under (A) any contract,agreement, commitment, indenture, mortgage, lease, pledge, note, license, permitor other instrument or obligation applicable to such individual or (B) anyjudgment, order, decree, law, rule or regulation or other restriction of anyGovernmental Authority, in each case to which such Principal Shareholder orInvestor Loan Holder is a party or by which such Principal Shareholder orInvestor Loan Holder is bound or to which any of their respective assets orproperties are subject, (ii) result in the creation or imposition of any Lienson such Principal Shareholders' or Investor Loan Holder's assets or propertiesor (iii) result in the acceleration of, or permit any Person to accelerate ordeclare due and payable prior to its stated maturity, any obligation of suchPrincipal Shareholder or Investor Loan Holder. 4.3 No Consents. To each individual's knowledge, no prior notice to,filing with, or authorization, registration, consent or approval of anyGovernmental Authority or other Person is necessary for the execution, deliveryor performance of this Agreement or the consummation of the transactionscontemplated thereby by such Principal Shareholder or Investor Loan Holder. 4.4 Warrants. Such Principal Shareholder or Investor Loan Holderrepresents and warrants that, prior to Closing he will have exercised orterminated all warrants and options to purchase shares of Strandtek common stockheld by such Principal Shareholder or Investor Loan Holder; provided, however,this Section 4.4 shall not apply to Ron Basar who will continue to own Strandtekwarrants subsequent to Closing. 4.5 Ownership. Such Principal Shareholder owns his shares of StrandtekCapital Stock indicated on Appendix 2.1 to the Exchange Agreement (the "Shares")beneficially and of record, free and clear of any Liens, other than thosearising under federal and state securities laws. Such Investor Loan Holder ownshis Investor Loan beneficially and of record, free and clear of any Liens, otherthan those arising under federal and state securities laws. There are no votingtrust arrangements, shareholder agreements or other agreements (i) granting anyoption, warrant or right of first refusal with respect to the Shares to anyPerson, (ii) restricting the right of such Principal Shareholder to transfer hisShares to Corniche in accordance with the Exchange Agreement or (iii)restricting any other right of such Principal Shareholder with respect to suchShares. Subject to the limitations imposed generally by applicable securitieslaws, such Principal Shareholder has the absolute and unrestricted right, powerand capacity to assign and transfer his Shares to Corniche free and clear of anyLiens (except for restrictions imposed generally by applicable securities laws).Upon delivery to Corniche of the certificates representing such Shares atClosing in exchange for the consideration to be paid by Corniche at the Closing,Corniche will acquire good, valid and marketable title to the Shares, free andclear of any Liens (except for Liens created by Corniche and restrictionsimposed generally by applicable securities laws). There are no agreementsrestricting the right of such Investor Loan Holder to exchange his InvestorSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Loans to Corniche in accordance with the Exchange Agreement or restricting anyother right of the Investor Loan Holder with respect to such Shares, subject tothe limitations imposed generally by applicable securities laws, such InvestorLoan Holder has the absolute and unrestricted right, power and capacity toexchange his Investor Loans to Corniche free and clear of any Liens. Theinformation provided by such Principal Shareholder or Investor Loan Holderregarding his or her state of residence is true and correct. -15- 4.6 Brokers. No Person is or will be entitled to a broker's, finder's,investment banker's, financial adviser's or similar fee from such PrincipalShareholder or Investor Loan Holder in connection with the Exchange Agreement orany of the transactions contemplated thereby. 4.7 Accredited Investor. Such Principal Shareholder or Investor LoanHolder is an "accredited investor" as such term is defined in Regulation Dpromulgated under the Securities Act of 1933, as amended (the "Securities Act"). 4.8 Experience. Such Principal Shareholder or Investor Loan Holder,alone or together with his advisors, has such knowledge and experience infinancial and business matters that he is capable of evaluating the merits andrisks of the transactions contemplated by the Exchange Agreement and theexchange of securities pursuant thereto. 4.9 Investment. Such Principal Shareholder or Investor Loan Holder isacquiring Corniche Common Stock, Corniche Series D Preferred Stock and/or SeriesC Preferred Stock ("Corniche Securities") for investment for his own account andnot with a view to, or for resale in connection with, any distribution thereofin violation of applicable law, and such Principal Shareholder or Investor LoanHolder has no present intention to sell, convey, dispose of or otherwisedistribute any interest in or risk related to Corniche Securities issued underthe Exchange Agreement except pursuant to an effective registration statement orin a manner consistent with the requirements of the federal and state securitieslaws. Such Principal Shareholder or Investor Loan Holder confirms that suchPrincipal Shareholder or Investor Loan Holder has no contract, understanding,agreement or arrangement with any Person to sell, assign, or otherwise transferto such Person, or to any other Person, any or all of the Corniche Securitiesthat such Principal Shareholder or Investor Loan Holder will receive inconnection with the transactions contemplated by the Exchange Agreement. SuchPrincipal Shareholder or Investor Loan Holder acknowledges that such PrincipalShareholder or Investor Loan Holder understands that the Corniche Securitiessuch Principal Shareholder or Investor Loan Holder shall receive under theExchange Agreement have not been registered under the Securities Act by reasonof a specific exemption from the registration provisions of the Securities Actwhich depends upon, among other things, the bona fide nature of the investmentintent as expressed herein. 4.10 Risk Awareness. Such Principal Shareholder or Investor Loan Holderconfirms that he understands and has fully considered for purposes of suchPrincipal Shareholder's or Investor Loan Holder's investment in CornicheSecurities in connection with the transactions contemplated by the ExchangeAgreement (the "Investment") the risks of such Principal Shareholder's orInvestor Loan Holder's Investment and that there are substantial restrictions onthe transferability of Corniche Securities, and, accordingly, it may not bepossible for such Principal Shareholder or Investor Loan Holder to liquidate hisInvestment in the case of emergency. 4.11 Ability to Bear Risk. Such Principal Shareholder or Investor LoanHolder confirms that he is able (i) to bear the economic risk of his Investment,(ii) to hold his Investment for an indefinite period of time, and (iii)presently to afford a complete loss of his Investment. 4.12 Opportunity to Investigate. Such Principal Shareholder or InvestorLoan Holder confirms that he or his representatives and advisors have been giventhe opportunity to ask -16-Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.questions of, and to receive answers from, persons acting on behalf of Cornicheconcerning the terms and conditions of the transactions contemplated by theExchange Agreement and the business and prospects of Corniche, and to obtain anyadditional information, to the extent such persons possess such information orcan acquire it without unreasonable effort or expense and without breach ofconfidentiality obligations, necessary to assist such Principal Shareholder orInvestor Loan Holder in evaluating his Investment. 4.13 Reliance on Advisors. Such Principal Shareholder or Investor LoanHolder confirms that, with respect to his Investment, such Principal Shareholderor Investor Loan Holder is relying, if at all, solely upon the advice of suchPrincipal Shareholder's or Investor Loan Holder's personal, legal, financial andtax advisors with respect to the tax and other aspects of such PrincipalShareholder's or Investor Loan Holder's Investment, except as otherwisecontemplated in the Exchange Agreement. 4.14 Reliance. The Principal Shareholder and Investor Loan Holderconfirm that such Principal Shareholder and Investor Loan Holder is relying uponsuch due diligence review and the representations, warranties and agreements ofCorniche made herein and in the documents referred to herein, and no otherrepresentations, warranties and agreements. 4.15 Reliance on Representations, Warranties and Acknowledgments. Therepresentations, warranties and acknowledgments of each Principal Shareholder orInvestor Loan Holder herein are made by such Principal Shareholder or InvestorLoan Holder with the intent that they may be relied upon in determining suchPrincipal Shareholder's or Investor Loan Holder's suitability as an investor inCorniche, and each Principal Shareholder or Investor Loan Holder acknowledgesthat certificates representing Corniche Securities to be received by suchPrincipal Shareholder under the Exchange Agreement shall bear the followinglegend (which may be in addition to other legends applicable to suchcertificates) and that the transfer agent for Corniche may be given stoptransfer instructions with respect to such shares: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS. 5.0 Representations And Warranties Of Corniche. Subject to Sections 1.0and 2.0 of this Agreement and the Previously Disclosed information, Cornichehereby represents and warrants to Strandtek, the Principal Shareholders and theInvestor Loan Holders as follows: 5.1 Organization and Qualification. 5.1.1 Corniche is a corporation duly organized, validly existing and ingood standing under the laws of the State of Delaware and has the power andauthority to own, lease and operate its properties and to conduct its businessas presently conducted (the "Corniche -17-Business"). Corniche is duly qualified to transact business as foreigncorporations and is in good standing in each jurisdiction in which the conductof its business or the ownership, leasing or operation of its property requiressuch qualification, except for failures to be so qualified or in good standingwhich would not, singly or in the aggregate with all such other failures, have aCorniche Material Adverse Effect. Corniche is not in violation of any of theprovisions of its Articles of Incorporation, as amended or similar governingdocuments, or by-laws, as amended. True and complete copies of such Articles ofIncorporation and by-laws, as currently in effect, have previously beendelivered to Strandtek, the Principal Shareholders and the Non-shareholder LoanHolders. 5.1.2 Prior to the date hereof, Strandtek has been given access to trueand complete copies of all of Corniche's minute books, including minutes ofmeetings of and resolutions adopted by the Board of Directors and shareholdersof Corniche to the extent the same are available to Corniche. There are no otherSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.material minutes or resolutions which have been adopted by the Board orshareholders of Corniche. 5.1.3 Except as set forth on Schedule 5.1.3 of the Corniche DisclosureSchedule, Corniche is not a party to any stock purchase agreement, registrationrights agreement, shareholders' agreement, voting rights agreement, investoragreement, stock option agreement, warrant, or other agreement requiring theissuance of any shares of Corniche's capital stock. To Corniche's knowledge,there are no shareholder or voting agreements or similar agreements among theshareholders of Corniche in their capacities as such. 5.2 Capitalization; Funded Debt. 5.2.1 Section 5.2.1 of the Corniche Disclosure Schedule sets forth thenumber of shares of each class and series of capital stock of Corniche which areauthorized for issuance and, as of the date hereof, the number of shares thatare outstanding. Corniche has Previously Disclosed a copy of such itsshareholder list as maintained by the stock transfer agent (the "CornicheShareholder List"), as well as a list of shares of capital stock of Cornicheissuable to any Person that is not reflected on the Corniche Shareholder List.All of such outstanding and issuable shares are validly issued, fully paid andnon-assessable. No shares of Corniche's capital stock possess or are subject topreemptive rights or rights of first refusal and no shares have been issued inviolation of any preemptive rights or rights of first refusal. Except asPreviously Disclosed, no shares of Corniche's capital stock are held by it astreasury shares. 5.2.2 Section 5.2.2 of the Corniche Disclosure Schedule lists, for eachPerson and benefit plan adopted by it who owns any warrants, options or rightsto purchase any shares of the capital stock of Corniche, the number owned and adescription thereof, the class and series of shares issuable upon exercise ofsuch warrants, options or rights, and the number of shares subject to suchwarrants, options or rights, the vesting date (if applicable), expiration date,and exercise price applicable thereto. Except as set forth in Section 5.2.2 ofthe Corniche Disclosure Schedule, there are no outstanding subscriptions,options, rights, warrants, convertible securities or other agreements orcommitments to issue, or contracts or any other agreements obligating Cornicheto issue, or to transfer from treasury, any shares of capital stock of Cornicheof any class or kind, or securities convertible into such capital stock ofCorniche. -18- 5.2.3 Except as reflected on the Current Balance Sheet (as defined inSection 5.22.1), and for changes occurring after September 30, 2001, Cornichedoes not have any term or funded debt, debt to banks or debt to Affiliates. ToCorniche's knowledge, except as Previously Disclosed, if applicable, no eventhas occurred which (whether with or without notice, lapse of time or thehappening or occurrence of any other event) would constitute a default by itwhich has not been cured or waived under any agreement or other instrumentrelating to any funded debt, bank loan or debt to Affiliates. Section 5.2.3 ofthe Corniche Disclosure Schedule accurately sets forth Corniche's debt to banks,debt for borrowed money and debt to Affiliates as of the date hereof. 5.2.4 Except as set forth on Section 5.2.4 of the Corniche DisclosureSchedule, Corniche is not a guarantor of the obligations of any Person. 5.2.5 Except as Previously Disclosed, there are no accrued, declared,or unpaid dividends on any shares of Corniche's capital stock. At Closing, therewill be no accrued, declared or unpaid dividends on any shares of Corniche'scapital stock. 5.3 Subsidiaries; Acquisitions; Dispositions. 5.3.1 Corniche does not currently, directly or indirectly own orcontrol any Subsidiary. 5.3.2 Corniche currently, directly or indirectly (i) does not own ofrecord or beneficially (A) any shares of capital stock or securities convertibleinto capital stock of any other corporation or (B) any equity interest in anypartnership, joint venture, limited liability company or other businessenterprise or (ii) does not own or control through any means any other entity.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.3.3 There are no agreements between Corniche and any third partyrelating to the operation, governance, ownership or other material aspect of anyother business enterprise. 5.4 Taxes. 5.4.1 Corniche has previously provided to Strandtek copies of all Taxreturns filed by it and its Subsidiaries from January 1, 1997 through the dateof execution of this Agreement. Except as Previously Disclosed, no tax returnshave been audited or are the current subject of an audit by any federal or stateauthority. 5.4.2 Corniche (i) has complied in all respects with all applicablelaws, rules and regulations relating to the payment and withholding of Taxesfrom the wages or salaries of employees and independent contractors, (ii) haspaid over to the proper governmental authorities all amounts required to be sowithheld and (iii) is not liable for any Taxes for failure to comply with suchlaws, rules and regulations. 5.4.3 Corniche is not a party to any agreement that provides for thepayment of any amount that, if paid, would be nondeductible (in whole or inpart) pursuant to Section 280G of the Code in connection with the consummationof the transactions contemplated by the Exchange Agreement or otherwise. -19- 5.4.4 Except as Previously Disclosed, all of Corniche's Taxes have beenpaid in full to the appropriate governmental authorities or fully accrued orprovided for with respect to fiscal periods covered by the financial statementsdescribed in Section 5.22 of this Agreement other than any liability for unpaidTaxes that may have accrued since September 30, 2001 in connection with theoperation of the Corniche Business by it in the ordinary course. Corniche willprepare and timely file with the appropriate Governmental Authorities allreturns and reports with respect to franchise, income and all other Taxesrequired to be filed by it at or before the Closing Date, taking into accountany extension of time to file granted to or obtained on behalf of Corniche. AllTax returns were (or in the case of Tax returns to be filed subsequent to thedate hereof, will be) correct and complete in all material respects when filed. 5.4.5 No assessments or additional Taxes have been proposed orthreatened against Corniche or any of such Company's assets. To the best ofCorniche's knowledge, there are no pending investigations of Corniche or its Taxreturns by any taxing authority, and there are no Tax Liens on any of its assetsother than Liens for Taxes not yet due and payable. 5.5 Other Business Names. Corniche has Previously Disclosed eachbusiness name or registered trade name currently used by it in connection withits business, and each jurisdiction, if any, in which any such name isregistered. 5.6 Owned Real Property. Corniche does not own any real property. 5.7 Leased Real Property. Corniche has previously delivered toStrandtek true and complete copies of all leases pursuant to which its leasesany real estate (the "Corniche Real Property Leases") which have been PreviouslyDisclosed in the Corniche Disclosure Schedule. To Corniche's knowledge, it isnot in default in any material respect under the Corniche Real Property Leases,and is not aware of any facts which, with notice and/or the passage of time,would constitute such a default. The possession of the applicable real propertyby Corniche under the Corniche Real Property Leases has not been disturbed and,to Corniche's knowledge, no claim has been asserted against it which ismaterially adverse to its rights in such leasehold interests. Except asPreviously Disclosed, Corniche is not subletting any building under any of theCorniche Real Property Leases or any part thereof. Except as reflected in theCorniche Real Property Leases, consummation of the transactions contemplated bythe Exchange Agreement will not constitute an assignment, sublease or defaultunder the Corniche Real Property Leases. 5.8 Proprietary Rights. 5.8.1 Corniche has Previously Disclosed to Strandtek all of Corniche'sSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) registrations of trademarks and other marks, rights to all other trademarksand other marks, trade names or other trade rights that relate to the CornicheBusiness, (b) pending applications for any such registrations that relate to theCorniche Business, (c) rights in or to patents and copyrights and all pendingapplications therefor that relate to the Corniche Business and (d) rights, otherthan software licenses generally available to the public, to all other tradesecrets, designs, plans, specifications, technology, methods, designs and otherproprietary rights, whether or not registered, that relate to the CornicheBusiness (all of the items in the preceding clauses (a) through (d),collectively, the "Corniche Proprietary Rights"). To Corniche's knowledge, ithas the perpetual right to use the Corniche Proprietary Rights and no person orentity has a right to -20-receive a royalty or similar payment in respect of any Corniche ProprietaryRights whether pursuant to any contractual arrangements entered into by it orotherwise. Except as set forth on Section 5.8 of the Corniche DisclosureSchedule, Corniche does not have any licenses granted by or to it relating toany of the Corniche Proprietary Rights, other than software licenses, each ofwhich is generally available to the public for a fee, granted to Cornicheincident to the operation of the Corniche Business. To Corniche's knowledge,none of such Corniche Proprietary Rights, nor its use thereof, infringe orotherwise violate the rights of any third party. No proceedings have beeninstituted against or, notices received by Corniche that are presentlyoutstanding alleging that its use of the Corniche Proprietary Rights infringe orotherwise violate any rights of a third party. Corniche has no knowledge of anyinfringement or violation of any of its rights in or to the Corniche ProprietaryRights used by it or the production, provision or sale of any services orproducts by it, and, to Corniche's knowledge, there is no basis for any suchclaim. 5.8.2 All employees of Corniche who have contributed to the developmentof any of the Corniche intellectual property owned by it have entered into validand binding agreements with Corniche sufficient to vest title in it to allintellectual property created by such employee in the scope of his or heremployment with Corniche. 5.9 Brokerage. Other than Bobby Cohen of Robert M. Cohen & Company,Inc. (who was retained solely by Corniche and whose fees shall be paid solely byCorniche), no broker or finder has rendered services to Corniche or toCorniche's knowledge, to any shareholder of Corniche in connection with theExchange Agreement or the transactions contemplated thereby. There are no otheragreements executed by Corniche which will obligate it or any of its successorsor Affiliates to pay any brokerage or finder's fee in the future with respect toany type of commercial, corporate, financial, acquisition, banking, borrowing orother business transaction, or to use any Person in connection with any of theforegoing. 5.10 Accounts Receivable. Except as Previously Disclosed, all of theaccounts receivable of Corniche has originated in the ordinary course of theCorniche Business, are valid, and to such Corniche's knowledge, are fullycollectible (subject to reserves reflected in the Current Balance Sheet asdefined in Section 5.22) and are not subject to any defense, counterclaim orsetoff, except to the extent of any such reserve. Except as PreviouslyDisclosed, no such account receivable has been factored. 5.11 Title to Tangible Assets. Corniche has good and marketable titlein and to all of the tangible assets of the Corniche Business reflected in theCurrent Balance Sheet plus all tangible assets purchased by it since the date ofthe Current Balance Sheet, less all tangible assets which it has disposed of inthe ordinary course of business since the date of the Current Balance Sheet,which tangible assets are free and clear of any Liens except as otherwisedisclosed in the next sentence. The only Liens of Corniche which exist and, atthe Closing, will exist on the tangible assets of Corniche are Liens whicheither (a) secure liabilities disclosed in the Current Balance Sheet or arise inthe ordinary course of the Corniche Business subsequent to the date of theCurrent Balance Sheet, (b) secure the ownership interests of lessors ofequipment used in the Corniche Business and Previously Disclosed, (c) are Liensfor Taxes or assessments or governmental charges or (d) are as set forth onSection 5.11 of the Corniche Disclosure Schedule.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.12 Material Contracts; Related Parties. -21- 5.12.1 Except as Previously Disclosed, as of the date hereof Cornicheis not bound by any material contract to be performed after the date hereof(including any employment, termination or consulting contract, agreement,arrangement or understanding (whether written or oral)). Except as PreviouslyDisclosed, to Corniche's knowledge, it has fulfilled all material obligationsrequired pursuant to such contracts to have been performed by it on its partprior to the date of this Agreement, and all parties to such contracts withCorniche are in substantial compliance and no event has occurred which throughthe giving of notice or the passage of time or both, would cause or constitute amaterial default under any such contracts or would cause the acceleration of anyobligation of any party thereto. 5.12.2 Except as Previously Disclosed, Corniche does not have anyoutstanding loans or advances to or from any Person and is not obligated to makeor to take any such loans or advances, except for advances to its employees inrespect of reimbursable business expenses anticipated to be incurred by them inconnection with their performance of services for Corniche. Corniche has notassumed, guaranteed, endorsed or otherwise become directly or contingentlyliable on any indebtedness of any other Person(including liability by way ofagreement, contingent or otherwise, to purchase, to provide funds for payment,to supply funds to or otherwise invest in the debt of another Person or entity,or otherwise to assure the creditor against loss), except for guarantees byendorsement of negotiable instruments for collection in the ordinary course ofbusiness. 5.12.3 Except as Previously Disclosed (including transactions reflectedon the books and records of Corniche provided or made available to Strandtek aspart of the Corniche Disclosure Documents, such as with respect to theacquisition of the Stamford business), there have been no transactions duringthe last three years between Corniche and any director, officer, employee,shareholder or Affiliate of it other than transactions relating to theemployment or shareholdings of any such Person. With respect to each suchtransaction Previously Disclosed, each such transaction has been on terms noless favorable to it than those which could have been obtained at the time frombona fide third parties. Since January 1, 1996, none of the officers, directorsor employees of Corniche or any spouse or relative of any of such persons, hasbeen a director or officer of, or has had any direct or indirect interest in,any firm, corporation, association of business enterprise which during suchperiod has been a supplier, customer or sales agent of the Corniche Business orhas competed with the Corniche Business, except for ownership of less than 5% ofthe outstanding stock of a publicly traded entity. 5.13 Corniche has no material customers. 5.14 Labor Matters. 5.14.1 Corniche is not a party to any collective bargaining agreement.Since January 1, 1999, Corniche has not had any strike, slowdown, picketing,work stoppage, material labor dispute or threat of a material labor dispute orany attempt or threat of an attempt by a labor union to organize its employees. 5.14.2 Corniche has Previously Disclosed, all current writtenemployment or consulting contracts with, and covenants against competition by,any Person employed by it presently or within the last year. True and correctcopies of all such written agreements have been delivered to Strandtek prior tothe date hereof. -22- 5.14.3 No suit is currently pending, or to Corniche's knowledge isbeing threatened, by any former employee alleging wrongful termination, breachof an employment agreement, discrimination or any claim for any payment fromCorniche.Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.15 Employee Benefit Plans. 5.15.1 All "employee benefit plans" within the meaning of Section 3(3)of ERISA covering employees or former employees of Corniche (the "CornicheEmployees") have been Previously Disclosed, and true and complete copies thereofhave been made available to Strandtek. 5.15.2 Except as Previously Disclosed, (a) to Corniche's knowledge, allemployee benefit plans covering Corniche Employees, to the extent subject toERISA (the "Corniche ERISA Plans"), are and have been in compliance with ERISA,including Section 404(a)(1) thereof; (b) to Corniche's knowledge, each CornicheERISA Plan which is a Pension Plan and which is intended to be qualified underSection 401(a) of the Code, has either (1) received a favorable determinationletter from the IRS, or (2) is or will be the subject of an application for afavorable determination letter, and Corniche is not aware of any circumstanceslikely to result in the revocation or denial of any such favorable determinationletter; (c) there is no pending or, to Corniche's knowledge, threatenedlitigation or administrative action relating to the Corniche ERISA Plans; and(d) to Corniche's knowledge, it has not engaged in a transaction with respect toany Corniche ERISA Plan that, assuming the taxable period of such transactionexpired as of the date hereof, would subject it to a tax or penalty imposed byeither Section 4975 of the Code or Section 502(i) of ERISA. 5.16 Insurance. Corniche has Previously Disclosed all insurancepolicies which it currently has in effect, and the status of any unpaid claimsthereunder. True and correct copies of such insurance policies have been madeavailable to Strandtek. All premiums due and payable under all such policieshave been paid and, to Corniche's knowledge, it is otherwise in compliance inall material respects with the terms and conditions of all such policies. 5.17 Licenses and Permits. Corniche and its employees have alllicenses, permits, orders, approvals and authorizations required for the conductof the Corniche Business as presently conducted and as contemplated to beconducted. Corniche has not received any notice of investigation, evaluation orsuspension of any such licenses, permits, orders, approvals or authorizations.To Corniche's knowledge, no suspension or cancellation of any such licenses,permits, orders, approvals or authorizations has been threatened or iscontemplated. 5.18 Authority Relative to the Exchange Agreement; Enforceability. Theexecution, delivery and performance of this Agreement and the Exchange Agreementare within the corporate power and authority of Corniche and has been dulyauthorized by all requisite corporate action on its part. Assuming dueauthorization, execution and delivery of this Agreement and the ExchangeAgreement by Strandtek, the Principal Shareholders, and Non-shareholder LoanHolders, this Agreement and the Exchange Agreement are legal, valid and bindingobligations of Corniche, enforceable against it in accordance with theirrespective terms, except insofar as their enforcement may be limited by (a)bankruptcy, insolvency, moratorium or similar laws affecting the enforcement ofcreditors' rights generally and (b) equitable principles -23-limiting the availability of equitable remedies. All persons who executed thisAgreement or the Exchange Agreement on behalf of Corniche have been dulyauthorized to do so. 5.19 Compliance with Other Instruments; Consents. All steps taken andto be taken by Corniche and its Board of Directors and its shareholders inconnection with the transactions contemplated by the Exchange Agreement are andshall be in accordance with all applicable provisions of its Certificate ofIncorporation, by-laws and other corporate governance documents to which it issubject. Neither the execution and delivery of this Agreement or the ExchangeAgreement by Corniche, nor the consummation of the transactions contemplatedhereby or thereby will: 5.19.1 conflict with, or result in a breach of any provision of, itsCertificate of Incorporation or by-laws; 5.19.2 to Corniche's knowledge (and assuming all required third partyconsents and approvals of contracts listed in response to Section 5.19.4 belowSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.and set forth on Section 5.19.2 of the Corniche Disclosure Schedule areobtained), violate, or conflict with, or result in a breach of any provision of,or constitute a default (or an event which, with the giving of notice, thepassage of time or otherwise, would constitute a default) under, or entitle anyparty (with the giving of notice, the passage of time or otherwise) toterminate, accelerate, modify or call a default under, or result in the creationof any lien, security interest, charge or encumbrance upon any of the propertiesor assets of it under, any of the terms, conditions or provisions of any note,bond, mortgage, indenture, deed of trust, license, contract, undertaking,agreement, lease or other instrument or obligation to which it is a party; 5.19.3 to Corniche's knowledge, violate any order, writ, injunction,decree, statute, rule or regulation applicable to it, its properties or itsassets; or 5.19.4 require any action or consent or approval of, or review by, orregistration or filing by Corniche with, any third party or GovernmentalAuthority, other than registrations, filings or other actions required underfederal and state securities laws; except, in the case of Sections 5.19.2,5.19.3 and 5.19.4, for any of the foregoing that, individually or in theaggregate, is or are not material to Corniche, taken as a whole, and would notmaterially and adversely affect the ability of the parties hereto to consummatethe transactions contemplated by the Exchange Agreement. 5.20 Compliance with Applicable Laws. Except as Previously Disclosed,to Corniche's knowledge it is in compliance in all material respects with allstatutes, laws, rules, regulations, orders and ordinances relating to theconduct of the Corniche Business, and it has not received any notice or adviceto the contrary. 5.21 Environmental Compliance. 5.21.1 There are no pending or, to Corniche's knowledge, threatened,actions or claims against it arising out of the presence or release into theenvironment of any chemicals, pollutants or contaminants relating to theoperations of the Corniche Business or arising in connection with any propertiesowned by it or as to which it is or could be a potentially responsible partyunder -24-applicable law, which individually or in the aggregate would have a CornicheMaterial Adverse Effect. 5.21.2 Corniche is in compliance in all material respects with allEnvironmental Laws. To Corniche's knowledge, it has not been alleged to be inviolation of, nor has it been subject to any administrative or judicialproceeding pursuant to, any Environmental Laws at any time during the past threeyears. 5.21.3 There are no facts or circumstances known to Corniche that couldreasonably form the basis for the assertion of any claim against it pursuant toany Environmental Laws, including any claim arising from its past or presentpractices. 5.21.4 Corniche has all material permits, approvals and consents underall applicable Environmental Laws to operate its businesses lawfully. 5.21.5 There have been no Regulated Substances generated, transported,Released or disposed of by Corniche during the past three years except in theordinary course of business in accordance with Environmental Laws. 5.22 Financial Statements. 5.22.1 Corniche has previously delivered to Strandtek the followingannual and interim financial statements of Corniche: the audited consolidatedbalance sheets of Corniche as of December 31, 2000 and 1999, the related auditedconsolidated statements of income, changes in shareholders' equity and cashflows of Corniche for the fiscal years ended December 31, 2000 and 1999(collectively, the "Corniche Audited Financial Statements"), the unauditedconsolidated balance sheet of Corniche as of September 30, 2001 (the "CurrentBalance Sheet") and the unaudited consolidated statements of income of CornicheSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.for the nine months ended September 30, 2001 and 2000 (the "Corniche UnauditedFinancial Statements"). The Corniche Audited Financial Statements fairly presentthe financial condition of Corniche and the results of operations and cash flowsas of the dates and for the periods to which they apply, as the case may be, andsuch statements have been prepared in conformity with GAAP. The CornicheUnaudited Financial Statements were prepared from the books and records ofCorniche and are true, complete and correct in all material respects, and thenormal audit adjustments required in connection therewith will not be materialin amount or effect. 5.22.2 Since January 1, 1999 no unrecorded funds or assets of Cornichehave been established for any purpose; no accumulation or use of its funds hasbeen made without being properly accounted for in its books and records; allpayments by or on behalf of Corniche have been duly and properly recorded andaccounted for in its books and records; no false or artificial entry has beenmade in its books and records for any reason; no payment has been made by or onbehalf of Corniche with the understanding that any part of such payment is to beused for any purpose other than that described in the documents, if any,supporting such payment; and Corniche has not has made, directly or indirectly,any illegal contributions to any political party or candidate, either domesticor foreign, or any contribution, gift, bribe, rebate, payoff, influence paymentor kickback, whether in cash, property or services, to any Person, to securebusiness or to pay for business secured by Corniche. -25- 5.22.3 Except as set forth in Section 5.22.3 of the Corniche DisclosureSchedule, the Current Balance Sheet includes accruals for all amounts due butnot paid as of the date thereof under all taxation laws (other than current yearapplicable franchise taxes) in accordance with GAAP, and accruals for vestedvacation entitlement and for holiday and sick pay in accordance with GAAP. 5.22.4 Corniche has not incurred any liabilities or obligations of anynature (whether accrued, absolute, contingent, threatened, unknown or otherwise)which would be required to be included in a balance sheet prepared in accordancewith GAAP, except (a) as reflected on the Current Balance Sheet, (b) forliabilities and obligations incurred in the ordinary course of businessconsistent with past practice since the date of the Current Balance Sheet and(c) liabilities and obligations which have arisen in connection with theExchange Agreement and the transactions contemplated therein and herein. 5.22.5 Corniche has no actual, contingent or future liabilities,accrued or unaccrued, not Previously Disclosed to the Strandtek Parties.Corniche has no actual, contingent or future liabilities, accrued or unaccrued,or exposure regarding its prior reinsurance activities conducted directly orthrough its affiliates. 5.23 Litigation. There are no legal, administrative, arbitration orother proceedings or claims pending or, to Corniche's knowledge, threatened,against it, nor is Corniche subject to any existing judgment; nor has Cornichereceived any inquiry from any Governmental Authority about the transactionscontemplated by the Exchange Agreement, or about any violation or possibleviolation of any law or regulation. Prior to the date hereof, Corniche hasprovided to Strandtek's counsel a copy of all letters received by itsaccountants from counsel since December 31, 1998 with respect to pending orthreatened legal, administrative, arbitration or other proceedings. 5.24 Adverse Business Changes. Except as set forth on Section 5.24 ofthe Corniche Disclosure Schedule, since the date of the Current Balance Sheet,there has not been: 5.24.1 Any change in Corniche's Business that would be reasonablylikely to have, individually or in the aggregate, a Corniche Material AdverseEffect; 5.24.2 Any material damage or loss to any material asset or property ofCorniche, regardless of insurance; 5.24.3 Any disposition, mortgage, pledge, or subjection to any Lien,claim, charge or option of any property or asset of Corniche, any commitmentmade or liability incurred by Corniche, or any cancellation or compromise of anydebt or claim of Corniche, otherwise than in the ordinary course of business;Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.24.4 Any dividend or distribution declared, set aside or paid inrespect of any of Corniche's capital stock or any repurchase by it of shares ofits capital stock; 5.24.5 Any employment contract not terminable at will without cost(except for normal salary) beyond the effective date of termination entered intoby Corniche; or any increase or decrease in the rates of compensation payable byCorniche to any of its officers, directors, -26-employees or agents, other than general increases to personnel made inaccordance with past practices; or, any declaration, payment, commitment, orobligation of any kind for the payment by Corniche of any bonus, other thanbonuses paid in the ordinary course of business; or any implementation,modification, amendment or termination of any retirement, termination, severanceor other benefits to officers, directors, employees or agents of Corniche; 5.24.6 Any amendment, termination or threatened termination of anymaterial contract, agreement, insurance policy, plan, lease, or license to whichCorniche is a party or by which it may be bound, otherwise than in the ordinarycourse of business; 5.24.7 Any material change in its methods of doing business; 5.24.8 Any distribution or disposition of assets other than in theordinary course of business; 5.24.9 Any loss or, to Corniche's knowledge, any threatened loss of amaterial customer; 5.24.10 Any termination of any permit or license issued to Corniche orto any of its employees or agents upon which a material portion of the CornicheBusiness is dependent; or 5.24.11 Any statute, order, judgment, writ, injunction, decree, permit,rule or regulation of any court or Governmental Authority adopted or entered orproposed to be adopted or entered which may reasonably be expected to materiallyand adversely affect any of Corniche's property or business except as affectsbusiness generally in the United States. 5.25 Corniche SEC Documents and Other Public Disclosures. Corniche hasfiled with the SEC its annual reports on Form 10-K for the years ended December31, 2000, 1999 and 1998 and its Forms 10-Q for the quarters through September30, 2001 under the Securities Exchange Act of 1934, as amended (the "ExchangeAct") (such documents, as supplemented and amended since the time of filing,collectively, the "Corniche SEC Documents"). The Corniche SEC Documents,including any financial statements or schedules included therein, at the timefiled (a) did not contain any untrue statement of a material fact or omit tostate a material fact required to be stated therein or necessary in order tomake the statements therein, in light of the circumstances under which they weremade, not misleading, and (b) complied in all material respects with theapplicable requirements of the Exchange Act. Corniche has previously provided toStrandtek's counsel true and complete copies of the Corniche SEC Documents. Theconsolidated financial statements Corniche included in the Corniche SECDocuments at the time filed complied as to form in all material respects withapplicable accounting requirements and with the published rules and regulationsof the SEC with respect thereto, were prepared in accordance with generallyaccepted accounting principles applied on a consistent basis during the periodsinvolved (except as may be indicated in the notes thereto or, in the case ofunaudited statements, as permitted by Form 10-Q of the SEC), and fairly present(subject, in the case of unaudited statements, to normal, recurring auditadjustments) the consolidated financial position of Corniche and itsconsolidated subsidiaries as at the dates thereof and the consolidated resultsof their operations and cash flows for the periods then ended. 5.26 Investment Representations. -27-Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 5.26.1 Sophistication. Corniche is an "accredited investor" as suchterm is defined in Regulation D promulgated under the Securities Act and, aloneor together with its advisors, has such knowledge and experience in financialand business matters that it is capable of evaluating the merits and risks ofthe transactions contemplated by the Exchange Agreement and the exchange ofsecurities pursuant thereto. 5.26.2 Investment. Corniche is acquiring Strandtek Common Stock andInvestor Loans (collectively, "Strandtek Securities") for its own account andnot with a view to, or for resale in connection with, any distribution thereofin violation of applicable law, and Corniche has no present intention to sell,convey, dispose of or otherwise distribute any interest in or risk related toStrandtek Securities except pursuant to an effective registration statement orin a manner consistent with the requirements of the federal and state securitieslaws. Corniche confirms that it has no contract, understanding, agreement orarrangement with any Person to sell, assign, or otherwise transfer to suchPerson, or to any other Person, any or all of the Strandtek Securities thatCorniche is acquiring in connection with the transactions contemplated by theExchange Agreement. Corniche acknowledges that it understands that the StrandtekSecurities it shall receive under the Exchange Agreement have not beenregistered under the Securities Act by reason of a specific exemption from theregistration provisions of the Securities Act which depends upon, among otherthings, the bona fide nature of the investment intent as expressed herein. 5.26.3 Risk Awareness. Corniche confirms that it understands and hasfully considered for purposes of its investment in Strandtek Securities inconnection with the transactions contemplated by the Exchange Agreement (the"Corniche Investment") the risks of the Corniche Investment and that there aresubstantial restrictions on the transferability of Strandtek Common Stock, and,accordingly, it may not be possible for Corniche to liquidate the CornicheInvestment in the case of emergency. 5.26.4 Ability to Bear Risk. Corniche is able (i) to bear the economicrisk of the Corniche Investment, (ii) to hold the Corniche Investment for anindefinite period of time, and (iii) presently to afford a complete loss of theCorniche Investment. 5.26.5 Opportunity to Investigate. Corniche confirms that it or itsrepresentatives and advisors have been given the opportunity to ask questionsof, and to receive answers from, persons acting on behalf of the Companiesconcerning the terms and conditions of the transactions contemplated by theExchange Agreement and the business and prospects of the Companies, and toobtain any additional information, to the extent such persons possess suchinformation or can acquire it without unreasonable effort or expense and withoutbreach of confidentiality obligations, necessary to assist Corniche inevaluating the Corniche Investment. 5.26.6 Reliance on Advisors. Corniche confirms that, with respect tothe Corniche Investment, it is relying, if at all, upon the advice of its legal,financial and tax advisors with respect to the tax and other aspects of theCorniche Investment, except as otherwise contemplated in the Exchange Agreement. 5.26.7 Reliance. Corniche confirms that its is relying upon such duediligence review and the representations, warranties and agreements of theCompanies and the Principal -28-Shareholders and Investor Loan Holders made herein and in the documents referredto herein, and no other representations, warranties and agreements. 5.26.8 Reliance on Representations, Warranties and Acknowledgments. Therepresentations, warranties and acknowledgments of Corniche herein are made byCorniche with the intent that they may be relied upon in determining suchCorniche's suitability as an acquirer of Strandtek Securities, and Cornicheacknowledges that certificates representing Strandtek Common Stock issued inexchange for the Strandtek Common Stock to be received by Corniche under theExchange Agreement shall bear the following legend (which may be in addition toother legends applicable to such certificates):THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDERSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE ANDMAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVEREGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS ORPURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACTOR SUCH LAWS. 5.27 Full Disclosure. The Previously Disclosed information provided toStrandtek by Corniche or any of its representatives during Strandtek'sexamination of the business, affairs, results of operations and financialcondition of Corniche and its Subsidiaries taken as a whole did not contain anyuntrue statement of a material fact or omit to state any material fact necessaryin order to make the statements made therein, in light of the circumstances inwhich they were made, not misleading. No representation or warranty made in thisAgreement, and no certification furnished or to be furnished by Cornichepursuant to this Agreement, contains or will contain any untrue statement of amaterial fact or omits, or will omit, to state a material fact necessary to makethe statements contained herein or therein not misleading. 6.0 Knowledge. Any representation made herein which is qualified by theknowledge of, or notice given to, Strandtek or Corniche, as applicable, shallrefer to the actual knowledge of, or notice actually given to, any of theexecutive officers of Strandtek or Corniche, after reasonable inquiry by suchexecutive officers. Any representation made herein which is qualified by theknowledge of, or notice given to, the Principal Shareholders, or Non-shareholderLoan Holders shall refer to the actual knowledge of such individual, without anyduty of inquiry. Any representation made herein which is qualified by theknowledge of, or notice given to, the Representing Shareholders shall refer tothe actual knowledge of such Representing Shareholders, after reasonable inquirycommensurate with the representation being made. [SIGNATURE PAGE FOLLOWS] -29- IN WITNESS WHEREOF, Corniche, Strandtek, each of the PrincipalShareholders and the Non-shareholder Loan Holders have signed this Agreement asof the date first written above. CORNICHE GROUP INCORPORATED By: /s/ James Fyfe -------------------------------- Name: James Fyfe Title: Chairman STRANDTEK INTERNATIONAL, INC. By: /s/ Jerome Bauman -------------------------------- Name: Jerome Bauman Title: President PRINCIPAL SHAREHOLDERS:/s/ David Veltman /s/ Jerome Bauman --------------------------------- ------------------------------------David Veltman Jerome Bauman455 N. Indian Rocks Road 2294 Northwest 55th StreetBelleair Bluffs, FL 33770 Boca Raton, FL 33496Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results./s/ Greg Veltman /s/ Jan Arnett --------------------------------- ------------------------------------Greg Veltman Jan Arnett455 N. Indian Rocks Road Longwood RoadBelleair Bluffs, FL 33770 Sands Point, NJ 11050/s/ Sheila Duffy /s/ William G. Buckles, Jr. --------------------------- ------------------------------------Sheila Duffy William G. Buckles, Jr.455 N. Indian Rocks Road 455 N. Indian Rocks RoadBelleair Bluffs,FL 33770 Belleair Bluffs, FL 33770/s/ Craig Babcock /s/ Phil Palm --------------------------------- ------------------------------------Craig Babcock Phil Palmc/o Desert Institute of Physical Therapy 455 N. Suite A15953 Greenway Hayden Belleair Bluffs, FL 33770Scottsdale, AZ 85260 First signature page to Supplemental Disclosure Agreement/s/ Ray Juska /s/ Mike Barody --------------------------------- ------------------------------------Ray Juska Mike Barody17 Marion Drive 5 Surcingle RoadEast Lynne, CT 06333 Queensbury, NY 12804/s/ Ron Basar---------------------------------Ron Basar912 Shambliss LaneBuffalo Grove, ILNON-SHAREHOLDER LOAN HOLDERS/s/ Preston Whaley /s/ Clifford Chapman --------------------------------- ------------------------------------Preston Whaley Clifford Chapman2043 79th Street W. P.O. Box 14760Bradenton, FL 34209 Bradenton, FL 34280-4760Source: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Second signature page to Supplemental Disclosure AgreementSource: Caladrius Biosciences, Inc., 10-K, April 15, 2002Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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