Note 8 — Liabilities

Lines of Credit

The Company’s wholly owned Japanese subsidiary, STAAR Japan, has an agreement, as amended on December 28, 2012, with Mizuho Bank which provides for borrowings of up to 500,000,000 Yen, at an interest rate equal to the uncollateralized overnight call rate (approximately 0.12% as of December 30, 2016) plus a 0.50% spread, and may be renewed annually (the current line expires on November 21, 2017). The credit facility is not collateralized. The Company had 500,000,000 Yen outstanding on the line of credit as of December 30, 2016 and January 1, 2016 (approximately $4.3 million and $4.2 million based on the foreign exchange rates on December 30, 2016 and January 1, 2016, respectively), which approximates fair value due to the short-term maturity and market interest rates of the line of credit. In case of default, the interest rate will be increased to 14% per annum. As of December 30, 2016, there were no available borrowings under the line.

In August 2010, the Company’s wholly-owned Swiss subsidiary, STAAR Surgical AG, entered into a credit agreement with Credit Suisse (the “Bank”). The credit agreement provides for borrowing of up to 1,000,000 CHF (Swiss Francs) ($1.0 million at the rate of exchange on December 30, 2016), to be used for working capital purposes. Accrued interest and 0.25% commissions on average outstanding borrowings is payable quarterly and the interest rate will be determined by the Bank based on the then prevailing market conditions at the time of borrowing. The credit agreement is automatically renewed on an annual basis based on the same terms assuming there is no default. The credit agreement may be terminated by either party at any time in accordance with its general terms and conditions. The credit facility is not collateralized and contains certain conditions such as providing the Bank with audited financial statements annually and notice of significant events or conditions, as defined in the credit agreement. The Bank may also declare all amounts outstanding to be immediately due and payable upon a change of control or a material qualification as defined in the agreement. There were no borrowings outstanding as of December 30, 2016 and January 1, 2016.

Lease Line of Credit (Capital Leases)

On June 7, 2016, the Company entered into lease schedule 009 of an existing master lease agreement with Farnam Street Financial, Inc. (“Farnam”). The line of credit provided for borrowings of up to $2.0 million at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. Interim rent is paid until the full amount of the line is used at which time the lease commences. Approximately $1.5 million of the line was settled through sale-leaseback transactions. As of December 30, 2016, approximately $1,957,000 of the line had been used and $43,000 was available for borrowing. On January 31, 2017, lease 009 was closed and lease 009R commenced. Under 009R, equipment with a cost of $1,957,000 is financed over a period of 24 months at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option.

On June 12, 2014, the Company entered into lease schedule 008R with Farnam. Under the agreement, equipment with a cost of $964,612 was financed over a period of 36 months at a lease rate factor of 2.81% per $1 for hardware equipment and 3.12% per $1 for non-hardware equipment . At the end of the lease the Company can opt to continue to rent the equipment, return the equipment, or exercise a fair market value purchase option.

On January 30, 2017, the Company entered into lease schedule 010 with Farnam. The line of credit provides for borrowings of up to $2.0 million at a lease rate factor of 3.94% per $1 for hardware equipment and 4.75% per $1 for non-hardware equipment. Interim rent is paid until the full amount of the line is used at which time the lease commences. There are no material obligations outstanding under lease schedule 010 at this time.

Covenant Compliance

The Company is in compliance with covenants of its credit facilities and lines of credit as of December 30, 2016.

Asset Retirement Obligation

The Company recorded certain Asset Retirement Obligations (“ARO”), in accordance with ASC 410-20 in connection with the Company’s obligation to return its Japan facility to its “original condition”, as defined in the lease agreement. The Company has recorded approximately $195,000 and $156,000, representing the fair value of the ARO liability obligation in noncurrent liabilities at December 30, 2016 and January 1, 2016, respectively. The obligation is currently expected to be settled upon expiration of the lease in 2018.