SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 6, 1996
SPARTA SURGICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-11047 22-2870438
(State or other juris- (Commission (I.R.S. Employer
diction of incorporation) File Number) ID. Number)
Bernal Corporate Park
7068 Koll Center Parkway, Pleasanton, CA 94566
(Address of principal executive offices)
Registrant's telephone number, including area code (510)417-8812
not applicable
(Former name or former address, if changed since last report)
ITEM 5. OTHER EVENTS
On August 6, 1996, the Registrant settled three related civil actions
entitled Sparta Surgical Corporation v. Gerald S. Kramer ("Kramer"), Docket No.
94-0372, Plymouth County Superior Court, Massachusetts; Gerald S. Kramer v.
Sparta Surgical Corporation and Thomas F. Reiner ("Reiner"), Civil Action No.
94-CO-6337T, United States District Court, Western District, New York; and
Sparta Surgical Corporation v. Gerald S. Kramer, Docket No. 96-10716-RGS, United
States District Court, Eastern District, Massachusetts. These actions involved
disputes between the Registrant; Reiner, the Registrant's Chairman, President
and Chief Executive Officer; and Kramer, a former officer and Chairman of the
Registrant's Board of Directors and concerned Kramer's termination as an officer
and director, disputes regarding his employment agreement and various monetary
obligations between the parties. Under the settlement, the Registrant paid to
Kramer $262,500 and issued to him a promissory note in the amount of $62,500,
payable over five years. In addition, the parties exchanged general releases and
forgave all debts to each other which included obligations from Kramer to the
Registrant in the amount of approximately $371,000.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits:
10.85 Agreement of Settlement, General Release and Indemnity dated August
6, 1996 by and between the Registrant, Thomas F. Reiner, and Gerald
S. Kramer.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SPARTA SURGICAL CORPORATION
(Registrant)
By: Thomas F. Reiner
Thomas F. Reiner, Chairman of
the Board, President & CEO
Dated: August 19, 1996
SECURITIES AND EXCHANGE COMMISSION
EXHIBIT
TO
FORM 8-K
DATED AUGUST 6, 1996
EXHIBIT 10.85
AGREEMENT OF SETTLEMENT, GENERAL RELEASE AND INDEMNITY
This Agreement of Settlement, General Release and Indemnity ("Agreement"),
dated as of August 6, 1996, is by and between Gerald S. Kramer ("Kramer"), on
the one-hand, and Sparta Surgical Corporation, a Delaware corporation ("Sparta")
and Thomas F. Reiner, Sr., individually ("Reiner"), on the other hand, (with all
three sometimes collectively referred to as the "Parties").
W I T N E S S E T H
WHEREAS, Sparta commenced a civil action captioned Sparta Surgical
Corporation v. Gerald S. Kramer, Docket No. 94-0372 (the "Massachusetts
Action"), by filing a Complaint for Declaratory Relief on March 9, 1994 in the
Plymouth County Superior Court, Commonwealth of Massachusetts against Kramer,
and Kramer has asserted counterclaims against Sparta in the Massachusetts
Action;
WHEREAS, Kramer commenced a civil action captioned Gerald S. Kramer v.
Sparta Surgical Corporation and Thomas F. Reiner, Civil Action No. 94-CO-6337T
(the "New York Action") on July 15, 1994, in the United States District Court,
Western District of New York, and Sparta has asserted counterclaims against
Kramer in the New York Action;
WHEREAS, the Massachusetts Action and New York Action involve a dispute
between Kramer, and Sparta and Reiner regarding the termination of Kramer as an
officer, director and employee of Sparta, the termination of an Employment
Agreement by and between Kramer and Sparta dated December 5, 1992 (the
"Employment Agreement") and certain other related matters (the "Employment
Related Disputes") and other related disputes exist between the Parties
including but not limited to a dispute relating to amounts which may be owing
from Reiner or Sparta to Kramer, both pursuant to any promissory note presently
in existence, whether or not now due, including but not limited to those from
Reiner in the approximate principal amounts of $22,000 and $90,000, and that
from Sparta in the approximate principal amount of $378,770, or otherwise (the
"Obligations"), which the Parties seek to hereby resolve;
WHEREAS, Sparta commenced a civil action on April 4, 1996 captioned Sparta
Surgical Corporation v. Gerald S. Kramer, Docket No. 96-10716-RGS (the "UCC
Action"), in the United States District Court, District of Massachusetts, to
seek to have declared invalid any and all UCC financing statements which Kramer
may have on record against certain of Sparta's assets (the "UCC Financing
Statements"), and one or more security agreements, pursuant to which Kramer is
claiming a security interest in such assets (together, the "Security Agreement")
and to recover damages caused by Kramer's claims of having such a security
interest;
WHEREAS, the Parties admit no wrongdoing of any kind and enter this
Agreement solely to resolve their disputes once and for all; and
WHEREAS, the Parties hereby intend to settle and dispose of, fully and
completely, any and all claims, demands and cause or causes of action now
existing or hereafter arising out of, connected with or incidental to the
dealings between the Parties, prior to the effective date hereof, including
without limitation, those relating to the Massachusetts Action, the New York
Action, the UCC Action, the Employment Agreement and the Employment Related
Disputes, and in connection therewith the Parties hereby agree as follows:
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1. PAYMENTS, RELEASE OF SECURITY INTEREST AND SECURITY:
1.1. Sparta shall pay to Kramer the sum of Three Hundred and Twenty Five
Thousand Dollars ($325,000.00) as follows: (i) the amount of Two Hundred Sixty
Two Thousand Five Hundred Dollars ($262,500.00) (the "Initial Payment") shall be
paid by certified check, wire transfer or other form of immediately available
funds promptly following the execution of this Agreement with the effectiveness
hereof being contingent upon the payment of such amount; and (ii) the amount of
Sixty Two Thousand Five Hundred Dollars ($62,500.00) shall be paid pursuant to
the terms of a Promissory Note (the "Note"), payable from Sparta to Kramer in
the form attached as Exhibit A hereto. Without acknowledging the validity
thereof, or otherwise contradicting the other statements herein as to this being
a general release of all claims among and between them, the parties agree that
these cash payments shall be allocated to the settlement of the claims regarding
the termination of Kramer's employment as an officer and director of Sparta.
1.2. Kramer agrees to execute contemporaneously with the execution of this
Agreement UCC-3 or UCC-2 Termination Statements and all other documents or
filings deemed reasonably necessary by Sparta's counsel to terminate any
security interest which Kramer may have or claim against Sparta's assets (or
those of its subsidiary or Reiner), including but not limited to, any arising
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out of a purported revival of a financing statement filed with the California
Secretary of State, pertaining to original File No. 8820 8015 dated August 28,
1988, a security agreement by and between Sparta and Chemical Bank dated August
5, 1988, or a security agreement dated December 15, 1992 by and between Sparta
and Star Bank, N.A., or any other Security Agreement and execute such documents
as may be reasonably necessary so as to effectively terminate, release or cancel
the Financing Statements and Security Agreement. An execution copy of these
documents are attached as Exhibit B hereto.
1.3. Upon the execution of this Agreement the Parties agree to cause to
have executed stipulations of dismissal, with prejudice, for filing in the
Massachusetts Action, UCC Action and the New York Action in the forms as
attached as Exhibits C.1, C.2 and C.3, hereto which shall be filed only upon the
receipt of the Initial Payment by Kramer pursuant to Section 1.1 hereof.
1.4. Sparta and Kramer agree that, as security for the obligations under
the Note, Sparta shall issue a common stock purchase warrant (the "Warrant") to
Kramer, which Warrant shall, in the event of an Exercise Condition (as defined
hereafter) entitle Kramer to purchase that number of shares of Sparta's common
stock, $0.002 par value (the "Common Stock") as have an aggregate value equal to
the amount of principal and interest (the "Debt") owing under the Note at such
time, at an exercise price of $0.01 per share. The number of shares issuable
pursuant to the terms of the Warrant shall be determined by dividing the amount
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of the Debt by the average closing price of Sparta's Common Stock for the ten
business days preceding the date of the Warrant. The term "Exercise Condition"
shall mean in the event of any default under the Note which is not cured within
ten (10) days following written notice thereof to Sparta. The warrant shall
automatically terminate in the event that Sparta satisfies the obligations owing
under the Note or six years from the date of its issuance.
2. MUTUAL GENERAL RELEASES:
2.1. In consideration of the promises and releases contained herein, the
payments being made hereunder, the agreements being delivered hereunder or
executed in connection herewith, and for other good and valuable consideration,
Kramer hereby releases, remises and forever discharges Sparta and its
subsidiaries, successors, assigns, officers, directors, employees, agents,
attorneys and affiliates, past, present or future, and Reiner and his
successors, executors, administrators, heirs, assigns, employees, agents,
attorneys and affiliates, past, present or future, from all debts, demands,
actions, causes of action, complaints, suits, accounts, covenants, contracts,
controversies, agreements, promises, doings, omissions, damages, and liabilities
and all claims and liabilities of every nature and description whatsoever, both
in law and in equity, whether known or unknown, which he may have or ever had
against either Sparta or Reiner at any time from the beginning of the world up,
to and including the execution of this Agreement, including without limitation,
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the Obligations and all claims which were raised, could have been raised, or
arise out of the Massachusetts Action, the New York Action, the UCC Action, the
Employment Agreement or the Employment Related Disputes.
2.2. In consideration of the mutual releases contained herein, the receipt
of releases and/or terminations of the UCC Financing Statements and Security
Agreement, the agreements being delivered hereunder or executed in connection
herewith and for other good and valuable consideration, Sparta and Reiner,
collectively and each of them individually, hereby release, remise, and forever
discharge Kramer, his successors, executors, administrators, heirs, assigns,
employees, agents, attorneys and affiliates, past present or future, from all
debts, demands, actions, causes of action, complaints, suits, accounts,
covenants, contracts, controversies, agreements, promises, doings, omissions,
damages, and liabilities and all claims and liabilities of every nature and
description whatsoever, both in law and in equity, whether known or unknown,
which they may have or ever had against Kramer at any time from the beginning of
the world up to and including the execution of this Agreement, including without
limitation, all claims which were raised, could have been raised, or arise out
of the Massachusetts Action, the New York Action, the UCC Action, the Employment
Agreement or the Employment Related Disputes, but specifically excluding any
Mercedes Related Claim, as hereinafter defined.
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3. INDEMNITY:
Kramer hereby agrees to indemnify, defend and hold harmless Sparta and
Reiner, their successors, assigns, executors, administrators, heirs,
subsidiaries, affiliates, attorneys, officers, directors, employees, agents or
predecessors and shall be liable to, and promptly shall reimburse Sparta or
Reiner (regardless of any applicable insurance coverage) for, from and against
all demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, third party costs and expenses, including, without limitation,
interest, penalties and reasonable attorney's fees, disbursements and expenses
incurred by Sparta or Reiner directly or indirectly, by reason of any claims
made by, or liability to, Mercedes-Benz Credit Corporation, its successors, etc.
("MBCC") arising out of Kramer's election to retain possession of a 1991
Mercedes-Benz 560SL sedan, VIN WDBCA39E1MA593053 (the "Automobile") including
but not limited to (i) any amounts hereinafter paid or payable by Sparta or
Reiner to MBCC under a financing arrangement for the Automobile or any expenses
which may be incurred by Sparta relating to the Automobile, including without
limitation to insurance costs or taxes; (ii) the amount of any damages to Sparta
or Reiner arising out of Kramer's retaining, using, transferring, or suffering
another's use of the Automobile, including but not limited to, damages arising
from liability caused by or arising out of the use of such Automobile by Kramer
or any other party; and (iii) the amount of any costs or expenses (including
reasonable legal fees, disbursements and expenses) incurred in defending any
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action brought to collect the amounts specified in the proceeding items (i) or
(ii) (each of the foregoing, including subparagraph (iii) being a "Mercedes
Related Claim").
3.1. Indemnification of Kramer. Sparta hereby agrees to indemnify, defend
and hold harmless Kramer, his successors, assigns, executors, administrators,
heirs and attorneys and shall be liable to, and shall reimburse Kramer for, from
and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, third party costs and expenses, including, without
limitation, interest, penalties and reasonable attorney's fees, disbursements
and expenses to which Kramer may become subject under applicable securities law,
insofar as such losses, claims, damages, expenses, liabilities or actions arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in a filing made with any federal or state securities
regulatory authority or self regulatory authority or arises out of or is based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary in order to make the statements therein not
misleading, if in connection with the actions giving rise to such claim, Kramer
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Sparta and, with respect to any criminal action
or proceeding, Kramer had no reasonable cause to believe his conduct was
unlawful; unless such untrue statement or omission was made in such filing in
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reliance upon and in conformity with information furnished in connection
therewith by Kramer or any underwriter expressly for use therein.
4. REPRESENTATIONS AND WARRANTIES: The Parties to this Agreement represent,
warrant, and agree as follows:
4.1. Each Party has received independent legal advice from its attorneys
with respect to the advisability of making the settlement provided for herein
and with respect to the advisability of executing this Agreement.
4.2. Each Party to this Agreement has made such investigation of the facts
pertaining to this settlement and this Agreement and of all the matters
pertaining thereto as he or it deems necessary.
4.3. Each Party has completely read all of the terms of this Agreement and
fully understands its contents and voluntarily accepts its terms. The persons
executing this Agreement on behalf of entities other than natural persons are
empowered to do so and hereby bind those entities.
4.4. Each Party has not heretofore assigned, transferred, or granted, or
purported to assign, transfer, or grant, any of the claims, demands, or causes
of action disposed of by this Agreement except for Kramer's assignment of this
Agreement and the Note to Fleet Bank ("Fleet"), which assignment has been
disclosed to Sparta and Reiner by Fleet and Kramer.
4.5. Kramer hereby represents that he claims no other security interest,
perfected or otherwise, against the assets of Sparta or any subsidiary or
affiliate, or against Reiner individually nor has he recorded any UCC financing
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statement to such affect in any jurisdiction which is not being terminated
hereby. Kramer further represents and acknowledges that he is not an officer or
director of Sparta.
4.6. The Parties will execute all such further and additional documents as
shall be reasonable, convenient, necessary or desirable to carry out the
provisions of this Agreement.
4.7. This Agreement is intended to be and is a final and binding agreement
between the Parties.
4.8. No Party relies upon any statement of any other Party in executing
this Agreement, except as expressly stated herein.
4.9 The Parties to this Agreement hereby represent, warrant and agree that
they will keep confidential the terms and conditions of this settlement and
agree and will instruct their respective attorneys, agents, accountants,
employees and family members, not to disclose such matters to anyone in any
manner unless such disclosure is provided to a tax preparer solely for the
purpose of preparing tax returns or required under federal or state securities
laws, pursuant to valid legal process, an unsolicited request from a regulatory
agency with a legal right to demand such information, or otherwise by law.
5. MISCELLANEOUS:
5.1. The Parties agree that any dispute between them shall be resolved by
binding arbitration under the Commercial Arbitration Rules promulgated by the
American Arbitration Association and that any hearings shall be held in San
Francisco, California.
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5.2. This Agreement, consisting of 11 pages, and Exhibits A, B, C.1, C.2
and C.3, and D is the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all prior and contemporaneous oral and
written agreements and discussions with respect to the subject matter hereof.
This Agreement may be amended only by an agreement in writing.
5.3. This Agreement is binding upon and shall inure to the benefit of the
Parties hereto, their respective present and former agents, servants, employees,
representatives, officers, directors, shareholders, affiliates, beneficiaries,
proprietors, heirs, executors, administrators, predecessors, and/or successors
in interest.
5.4. Each Party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any Party.
5.5. This Agreement may be executed in counterparts, and when each Party
has signed and delivered at least one such counterpart, each counterpart shall
be deemed an original, and, when taken together with other signed counterparts,
shall constitute one Agreement, which shall be binding upon and effective as to
all Parties. The Parties agree that facsimile signature shall be acceptable and
have the same force and effect as originals.
5.6. The enforcement of the Note being delivered as a part of this
Agreement shall be governed by its terms and not by the terms hereof.
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5.7. The Parties enter this Agreement as a binding instrument, on and as of
the date set forth herein, and effective as of such date.
Gerald S. Kramer Thomas F. Reiner, Sr.
- ---------------------------- ----------------------------
Gerald S. Kramer, Thomas F. Reiner, Sr.,
individually individually
SPARTA SURGICAL CORPORATION
Thomas F. Reiner
- ----------------------------
Thomas F. Reiner, President,
Chief Executive Officer and
Chairman of the Board
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