Note 12 — Commitments and Contingencies

Lease Obligations and Firm Commitment

The Company leases certain property, plant and equipment under capital and operating lease agreements. These leases vary in duration and contain renewal options and/or escalation clauses. Current and long-term obligations under capital leases are included in the Company’s consolidated balance sheets.

Estimated future minimum lease payments under leases having initial or remaining non-cancelable lease terms in excess of one year as of January 2, 2015 are as follows (in thousands):

Fiscal Year	Operating Leases			Capital Leases
2015	$	1,368	$	442
2016		796		348
2017		785		144
2018		328		—
2019		328		—
Thereafter		244		—
Total minimum lease payments	$	3,849	$	934
Less amounts representing interest		—		67
	$	3,849	$	867

Rent expense was approximately $1.4 million, $1.5 million, and $1.9 million, for the years ended January 2, 2015, January 3, 2014, and December 28, 2012, respectively.

The Company had the following assets under capital lease at January 2, 2015 and January 3, 2014 (in thousands):

	2014		2013
Machinery and equipment	$	1,141	$	3,922
Furniture and fixtures		334		611
Leasehold improvements		21		155
		1,496		4,688
Less accumulated depreciation		511		3,984
	$	985	$	704

Depreciation expense for assets under capital lease for each of the years ended January 2, 2015, January 3, 2014, and December 28, 2012, was approximately $330,000, $566,000, and $522,000, respectively.

Indemnification Agreements

The Company has entered into indemnification agreements with its directors and officers that may require the Company: (a) to indemnify them against liabilities that may arise by reason of their status or service as directors or officers, except as prohibited by applicable law; (b) to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified; and (c) to make a good faith determination whether or not it is practicable for the Company to obtain directors’ and officers’ insurance. The Company currently has directors’ and officers’ liability insurance through a third party carrier.

Tax Filings

The Company’s tax filings are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in assessments of additional taxes that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any ultimate amounts that are likely to result from these audits; however, final assessments, if any, could be significantly different than the amounts recorded in the consolidated financial statements.

Employment Agreements

The Company’s Chief Executive Officer and certain officers have as provisions of their agreements certain rights, including continuance of cash compensation and benefits, upon a “change in control,” which may include an acquisition of substantially all of its assets, or termination “without cause or for good reason” as defined in the employment agreements.

On October 3, 2014, the Company’s Chief Executive Officer announced his retirement effective March 1, 2015. Effective with his retirement, he has become a consultant to the Company through March 31, 2016. In March 2015, the Company will accrue an approximate $300,000 in benefits due to the former CEO, such benefits will be paid over a one year period beginning on March 1, 2015 and ending on March 31, 2016.

Effective March 1, 2015, the Company entered into an Employment Agreement with its new Chief Executive Officer, Caren Mason.

Litigation and Claims

From time to time the Company may be subject to various claims and legal proceedings arising out of the normal course of our business. These claims and legal proceedings may relate to contractual rights and obligations, employment matters, and claims of product liability. The most significant of these actions, proceedings and investigations are described below. STAAR maintains insurance coverage for product liability and certain securities. Legal proceedings can extend for several years, and the matters described below concerning the Company are at very early stages of the legal and administrative process. As a result, these matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable the Company to determine whether the proceedings are material to the Company or to estimate a range of possible loss, if any. Unless otherwise disclosed, the Company is unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on the Company’s consolidated results of operations, financial position or cash flows.

Securities and Exchange Commission Informal Inquiry

In a letter dated July 3, 2014, the United States Securities and Exchange Commission (“SEC”) advised STAAR that it is conducting an informal inquiry into compliance with U.S. securities laws. The letter requested documents concerning any FDA inspections, investigations, observations, noted violations, or warnings since January 1, 2014. The Company is cooperating with this informal inquiry.

Todd v. STAAR

On July 8, 2014, a putative securities class action lawsuit was filed by Edward Todd against STAAR and three officers in the federal court located in Los Angeles, California. The plaintiff claims that STAAR made misleading statements to and omitted material information from our investors between February 27, 2013 and June 30, 2014 about alleged regulatory violations at STAAR’s Monrovia manufacturing facility. On July 21, 2014, the Company was served with the Complaint. Although the ultimate outcome of this action cannot be determined with certainty, the Company believes that the allegations in the Complaint are without merit. The Company intends to vigorously defend against this lawsuit. The Company intends to file a motion to dismiss the complaint, when appropriate, in the ongoing proceeding. On October 20, 2014, plaintiff amended its complaint, dismissed two Company officers, added one other officer, and reduced the alleged Class Period to November 1, 2013 to June 30, 2014.