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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended January 3, 1997
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[ ] 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
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Commission file number 0-11634
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STAAR SURGICAL COMPANY
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(Exact name of registrant as specified in its charter)
Delaware 95-3797439
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1911 Walker Avenue
Monrovia, California 91016 91016
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code): (818) 303-7902
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this Chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 26, 1997 was approximately $118,100,000 based upon the
closing price per share of the Common Stock of $10.875 on that date.
The number of shares outstanding of the issuer's classes of Common Stock as of
March 26, 1997:
Common Stock, $.01 Par Value 13,075,646 shares
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DOCUMENTS INCORPORATED BY REFERENCE
Information required by Part III (Items 10, 11, 12 and 13) is incorporated by
reference to the Company's definitive proxy statement for its 1997 Annual
Meeting of Stockholders.
ADVISEMENT
CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K, PARTICULARLY UNDER ITEMS
1 THROUGH 8, CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE REFORM ACT). SUCH FORWARD-
LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS INCLUDING, WITHOUT LIMITATION, THOSE UNCERTAINTIES AND RISK FACTORS
DESCRIBED IN ITEM 7 -- MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- UNCERTAINTIES AND RISK FACTORS,
WHICH UNCERTAINTIES, RISKS AND OTHER FACTORS MAY CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENT EXPRESSED OR IMPLIED BY SUCH FORWARD-
LOOKING STATEMENTS.
PART I
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ITEM 1. BUSINESS
(a) GENERAL
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OVERVIEW
STAAR Surgical Company (STAAR or the Company) is a publicly traded (NASDAQ
symbol STAA) developer, manufacturer and global distributor of medical devices
used in minimally invasive ophthalmic surgery. The Company's products are
designed to improve the quality of patient outcomes, minimize patient risk and
discomfort, and simplify ophthalmic surgical procedures for surgeons and
patients. The Company's primary products are its foldable intraocular lenses
("IOLs"), its "wick" style glaucoma implant (the "Glaucoma Wick"), its
implantable contact lens ("ICL"), and its STAARVISC(TM) viscoelastic solution.
The Company's foldable IOLs are used as replacements for the natural lens after
its removal in cataract surgery. The ophthalmic surgeon can implant the foldable
IOL through an incision significantly smaller than that used to insert "hard"
IOLs. This provides numerous patient benefits including reduced risk of
infection, decreased post-operative pain and discomfort, and shorter
hospitalization and recovery time. The Glaucoma Wick is an innovative ocular
device developed to provide a more effective and longer-term solution for
glaucoma, a leading cause of blindness worldwide. The ICL is an ocular implant
designed to correct refractive disorders, such as myopia (near-sightedness) and
hyperopia (far-sightedness). STAARVISC(TM) is a viscoelastic solution used
during IOL and ICL surgery.
The Company markets its IOLs, which accounted for 94% of its revenues in 1996,
both domestically and in numerous foreign countries. The Company markets the
Glaucoma Wick, which the Company introduced in late 1995, and its ICLs and
STAARVISC(TM) viscoelastic solution, which the Company introduced in late 1996,
on a
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limited basis in selected foreign countries.
DEVELOPMENT OF BUSINESS OVER PAST FIVE YEARS AND RELEVANT PRIOR EVENTS
The Company was incorporated in California in 1982 as a successor to a
partnership for the purpose of developing, producing, and marketing IOLs and
other products for minimally invasive ophthalmic surgery. The Company was
reincorporated in Delaware in April 1986.
In 1982 and 1983 the Company's operations consisted mainly of research and
development and preliminary marketing and capital raising activities. In 1982
the Company commenced the development of foldable IOLs in association with Dr.
Thomas R. Mazzocco, M.D., who patented the concept of folding or otherwise
deforming an IOL or ICL for use in minimally invasive surgery. The Company
acquired Dr. Mazzoccos patent, and began production and sale of foldable IOLs in
1986 for implantation in connection with clinical studies for such products. In
September 1991, the Company received United States Food and Drug Administration
("FDA") pre-market approval for its foldable IOLs, which has been the Companys
principal product line to date. See "Intellectual Property Rights" and
"Products" in Item 1.
In May 1995, Intersectoral Research and Technology Complex Eye Microsurgery
("IRTC") granted an exclusive royalty bearing license to STAAR Surgical AG, a
wholly owned subsidiary of the Company, to manufacture, use and sell the
glaucoma devices in the United States, Europe, Latin America, Africa, Asia and
Japan, and non-exclusive rights with respect to the countries in the
Commonwealth of Independent States (or former Union of Soviet Socialists
Republics) and China. In January 1996, IRTC granted an exclusive royalty bearing
license to STAAR Surgical AG to manufacture, use and sell ICLs using its
biocompatible materials in the United States, Europe, Latin America, Africa,
Asia and Japan, and non-exclusive rights with respect to the Commonwealth of
Independent States. The Company has since adopted IRTC's biocompatible material
and glaucoma device design for the Company's Glaucoma Wick, and has incorporated
IRTC's biocompatible materials for use with the Company's proprietary ICL
design. See "Licenses and Distribution Rights" and "Products" in Item 1.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
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Through 1996 the Company operated primarily within the cataract medical device
segment of the overall ophthalmic market. Information relating to the Company's
financial condition for the fiscal years ended January 3, 1997, December 29,
1995 and December 30, 1994 is set forth below in "Item 8 - Financial Statements
and Supplementary Data". In late 1995 the Company introduced the Glaucoma Wick,
and in late 1996 the Company introduced the ICL and STAARVISC(TM) viscoelastic
solution, for sale in selected foreign countries.
(c) NARRATIVE DESCRIPTION OF BUSINESS
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BACKGROUND
The human eye is a specialized sensory organ capable of light reception and able
to receive visual images that are transmitted to the visual center in the brain.
The main parts of the eye are the cornea, the iris, the lens, the retina, and
the trabecular meshwork. The cornea is typically a spherically shaped window in
the front of the eye through which light passes. The iris is a muscular curtain
located behind the cornea which opens and closes to regulate the amount of light
entering the eye through the pupil, an opening at the center of the iris. The
lens is a clear structure located behind the iris which changes shape to better
focus the light to the retina, located in the back of
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the eye. The retina is a layer of nerve tissue consisting of millions of light
receptors called rods and cones, which receive the light image and transmit it
to the brain via the optic nerve. The anterior chamber of the eye, located in
front of the iris, is filled with a watery fluid called the aqueous humour,
while the portion of the eye behind the iris is filled with a jelly-like
material called the vitreous humour. The trabecular meshwork, a drainage channel
located between the cornea and the surrounding white portion of the eye,
maintains a low pressure in the anterior chamber of the eye by draining excess
aqueous humour.
There are a number of ocular diseases including cataracts and glaucoma and
common visual refractive disorders such as myopia, hyperopia and astigmatism.
Cataracts are an irreversible and progressive ophthalmic condition wherein the
eye's natural lens loses its usual transparency and becomes opaque. Glaucoma
results from the build-up of excessive intraocular pressure, primarily due to
poor drainage of the aqueous humor. The increase in pressure slowly and
progressively damages the optic disc, resulting in a gradual loss of vision.
Myopia and hyperopia are caused by an anatomical imbalance between the shape of
the eye and the resulting distance between the cornea and the retina.
Astigmatism is caused by irregularities in the smoothness and curvature of the
cornea, causing improper focusing of the incoming light on the retina and
consequential blurring of vision.
MARKETS
The market for ophthalmic products is a large and dynamic segment of the
healthcare industry. The major factors influencing this market are the aging
worldwide population, significant technological medical advancements which have
created cost effective treatments and therapies, the evolution toward managed
care and the growing importance of international markets. The Company's products
serve the following segments of the ophthalmic market:
CATARACT LENSES. Cataracts occur in varying degrees in approximately one-half
of Americans between the ages of 65 and 75, and approximately 70% of those over
the age of 75. Approximately 20% to 25% of cataract patients have pre-existing
astigmatism. Industry sources estimate that approximately 1.7 million iols were
implanted in the United States in 1996, generating approximately $224 million in
sales. The Company believes approximately 2.5 million IOLs were implanted
outside the United States during 1996 (not including China and Russia, for which
no reliable data exists), generating an additional $400 million of sales. The
Company believes that approximately 50% of the domestic market for IOLs in 1996
was held by foldable IOLs, compared to approximately 15% in 1992, and that
approximately 15% to 25% of the international market share is presently held by
foldable IOLs. The Company believes the share of the worldwide market held by
foldable IOLs will continue to increase by virtue of the benefits of foldable
IOLs over hard IOLs.
GLAUCOMA TREATMENTS. This market encompasses drug therapies as well as
traditional and laser surgical procedures for use in mitigating the effects of
glaucoma. There is no known cure for glaucoma; the most commonly prescribed
glaucoma drugs either inhibit the build-up of intraocular fluid or promote
increased drainage, in either case reducing intraocular pressure and eye damage.
Traditional surgical procedures for glaucoma (i.e., trabeculectomies) and laser
surgical procedures for glaucoma (i.e., trabeculoplasties) remove a portion of
the trabecular meshwork to create a channel for fluid to drain from the eye.
The selection of drug treatment over a trabeculectomy or trabeculoplasty is, in
part, dependent upon the stage of the disease and the prevailing glaucoma
treatment used in the country in which the treatment is given.
The Company believes that glaucoma currently afflicts approximately three
million persons in the United States, and that the number of international cases
exceeds that of the United States. The worldwide market for glaucoma drugs is
approximately $850 million, including approximately $450 million from the sale
of a single glaucoma drug. It is estimated that 100,000 trabeculectomies and
300,000 laser trabeculoplasties were performed in the United States alone in
1994, representing total expenditures of approximately $400 million. The
Company
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believes glaucoma surgery is more prevalent than glaucoma drug therapy
in certain foreign countries due to cost and other considerations.
REFRACTIVE VISION CORRECTION. The refractive vision correction market includes
corrective eyewear such as eyeglasses and external contact lenses and
traditional and laser surgical procedures. Approximately 50% of the world's
population is afflicted with common refractive vision disorders such as myopia,
hyperopia and astigmatism, and approximately 150 million people within the
United States currently use some form of eyewear to correct for these disorders.
in 1996, the vision correction market in the United States was approximately $15
billion. This market includes corrective eyeglasses, external contact lenses
and various surgical procedures such as radial keratotomy (RK), a conventional
surgical technique, and photorefractive keratectomy (PRK), a surgical technique
performed with the use of a laser. it is estimated that over one million RK
procedures have been performed in the united states, most of which have occurred
since 1989. in 1995, 350,000 rk procedures were performed, at an average cost
of $1,000-$3,000 per procedure. Surgeons have used PRK, a more recently
developed refractive surgery technique, in an estimated 600,000 procedures to
date worldwide, with a limited number occurring in the United States, where the
procedure was approved in 1996. PRK is expected to gain market share from RK.
Industry sources estimate that the number of PRK procedures in the United States
could reach 500,000 in 1997, representing a potential market of $750 million.
approximately seven million people in the united states are afflicted with
severe cases of myopia and hyperopia of greater than seven diopters which are
not currently addressed by existing conventional or laser surgical procedures
and frequently can be only partially corrected with eyeglasses and external
contact lenses.
VISCOELASTIC SOLUTION PRODUCTS. The Viscoelastic solution market relates to
gel-like substances used during IOL surgeries to maintain the space and shape of
the eye, to act as a buffer against cell damage and to otherwise act as a
lubricant for minimally invasive eye surgery. Industry studies indicate that
approximately 2.4 million units of viscoelastic solution were sold within the
United states in 1996, generating approximately $129 million in sales.
Management believes the international market for viscoelastic solution is at
least the size of the domestic market for this product.
STRATEGY
The Company's strategy is to increase its share of the worldwide market for
ophthalmic products through the development and marketing of innovative next
generation products and technologies which utilize minimally invasive surgical
procedures. The key elements of this strategy are to: (i) develop products that
deliver distinct clinical and economic benefits to patients and surgeons; (ii)
maintain a leading technological role in the industry; and (iii) expand markets
worldwide.
PRODUCTS
The Company develops, manufactures and globally distributes medical devices used
in minimally invasive ophthalmic surgery. The Company's products are designed
to (i) improve patient outcomes, (ii) minimize patient risk and discomfort, and
(iii) simplify ophthalmic procedures for the surgeon and patient. The Company's
principal customers are ophthalmologists, surgical centers, hospitals, managed
care providers, health maintenance organizations and group purchasing
organizations.
INTRAOCULAR LENSES (IOLS) AND RELATED CATARACT PRODUCTS. The Company's
principal products are its foldable iols for use in minimally invasive cataract
surgical procedures. The Company's IOLs can be folded or otherwise deformed,
and therefore can be implanted into the eye through an incision (less than 3 mm)
significantly smaller than the incision needed to insert hard iols
(approximately 5 mm to 10 mm). Once inserted, the Company's IOL
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unfolds naturally into the capsular bag which previously held the cataractous
lens. The primary advantages of using minimally invasive surgical procedures
are:
. Fewer Surgical Complications. A smaller incision minimizes eye
trauma and the potential for infection. In addition, the Company's
foldable IOL can typically be implanted under topical anesthesia,
thereby avoiding complications associated with the administration
of local anesthesia.
. Reduced Level of Surgically Induced Astigmatism. The ability to
eliminate sutures as a result of the smaller incision leads to a
reduction in the incidence of surgically induced astigmatism caused
by uneven healing of the surgical wound.
. Faster Recovery of Vision. Patients can typically recover their
best vision the same day the procedure is performed, as opposed to
thirty to forty-five days following surgery in the case of hard
IOLs.
. Enhanced Benefits to Surgeons. The use of foldable IOLs enables
ophthalmologists to more quickly perform surgical procedures at
lower cost, and with greater ease and consistently higher quality
outcomes.
The Company's foldable IOLs come in two differently configured styles, the
advanced single-piece ELASTIC(TM) model, and the ELASTIMIDE(TM) model based upon
the tradit ional three-piece design. The selection of one model over the other
is primarily based upon the preference of the ophthalmologist, although the
Company believes more experienced ophthalmologists prefer the single-piece
ELASTIC(TM) model. Sales of foldable IOLs accounted for approximately 97% of the
Company's total revenues for each of its 1993 through 1995 fiscal years and 94%
of total revenues for its 1996 fiscal year.
The Company believes the unique features of its foldable IOLs afford a number of
competitive advantages compared to other foldable IOLs such as ease of
implantation, better patient outcomes, and minimization of cell growth and
resulting capsular haze.
The Company has developed, and currently markets in certain foreign countries, a
toric version of its ELASTIC(TM) IOL, which is specifically designed for
patients with pre-existing astigmatism. The Company is the only foldable IOL
manufacturer to offer a product for astigmatism. The Company has implanted a
limited number of its toric IOLs in patients within the United States for
clinical study purposes pursuant to an Investigational Device Exemption ("IDE")
granted by the FDA in November 1992. The Company has completed Phase III
clinical studies for the toric IOL, and anticipates it will apply for FDA pre-
market approval to market this product in the United States in mid-1997. No
assurance can be given that this time schedule can be met, or that FDA pre-
market approval for this product will be obtained.
As part of its approach to providing a complete line of complementary products
for use in minimally invasive cataract surgery, the Company also markets several
styles of lens injectors and sterile cartridges used to insert IOLs, a
phacoemulsification machine used to remove the cataractous lens, and several
styles of disposable and reusable surgical packs and ultrasonic cutting tips
used with the Company's phacoemulsification machine.
GLAUCOMA WICK AND GLAUCOMA SHUNT. The Glaucoma Wick is a medical device
surgically implanted into the eye to reduce intraocular pressure ("IOP"). It is
made of biocompatible material which, through its porosity and hydrophilic
properties, promotes drainage of excess eye fluid. The Glaucoma Wick is
specifically designed for patients suffering from open-angled glaucoma, which is
the most prevalent type of glaucoma. In contrast to trabeculectomies and
trabeculoplasties, implantation of the Glaucoma Wick does not require
penetration of the anterior chamber of the eye. Instead, a small flap of the
outer eye tissue is folded back, the Glaucoma Wick is placed above the
trabecular meshwork and the outer flap is refolded into place. The Glaucoma
Wick swells to
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approximately five to ten times its original size and is absorbed
within one to six months after implantation, creating a new drainage pathway.
The twenty- to forty-minute surgical procedure to implant the Glaucoma Wick is
performed under local or topical anesthesia, typically on an outpatient basis.
Management believes the hydrophilic properties of the Glaucoma Wick and the
minimally invasive nature of the surgery offer several advantages over existing
surgical procedures including (i) greater efficacy, (ii) a longer-term solution,
(iii) reduced risk of surgical complications, and (iv) cost effectiveness.
The Company believes the Glaucoma Wick is an attractive product for (i) managed
care and health maintenance organizations and group purchasing organizations who
desire to control their costs and at the same time provide their customers with
a higher standard of health care, (ii) less developed countries which lack the
resources and infrastructure to provide continuous treatments, and (iii)
ophthalmic surgeons who have traditionally referred their patients to glaucoma
specialists. Adoption by ophthalmic surgeons, however, will be dependent upon
the rate at which they learn the advanced surgical skills necessary to perform
the implant or at which instrumentation is developed to simplify the procedure.
The Company will promote this product by educating surgeons through its highly
trained technical sales force. See "Uncertainties and Risk Factors - Risks
Relating to Commercialization of New Products." in Item 7."
The Company introduced the Glaucoma Wick in late 1995 for commercial sale on a
limited basis in South Africa and selected countries in Europe and South
America. The Company intends to apply to the FDA in mid-1997 for an IDE leading
to a 510(k) clearance to commercially market this product within the United
States. No assurance can be given as to when or if FDA 510(k) clearance for
this product will be obtained. See "Uncertainties and Risk Factors - Government
Regulation and Uncertainty of Product Approval" in Item 7.
Since 1987 the Company has marketed its MOLTENO(TM) style Glaucoma Shunt, a
medical device implanted at the latest stages of glaucoma, after conventional
treatments have been performed and failed and vision is effectively lost. The
Glaucoma Shunt is designed to relieve pain and prevent the removal of the eye.
The Company will continue to supply this product for patients in the last stages
of glaucoma.
IMPLANTABLE CONTACT LENSES (ICLS). ICLs are medical devices implanted in the eye
to permanently correct common refractive vision disorders including myopia,
hyperopia and potentially astigmatism. The ICL is initially targeted to persons
afflicted with severe hyperopia and myopia (defined as more than seven diopters)
which are not currently being addressed through current traditional or laser
surgical procedures and frequently can be only partially corrected with
eyeglasses or external contact lenses. These individuals, who suffer significant
vision impairment, are the most likely to seek surgical alternatives. The
Company also believes the ICL will be an attractive alternative for individuals
afflicted with moderate cases of myopia and hyperopia.
The Company's ICL is folded and implanted into the eye behind the iris and in
front of the normal lens using minimally invasive surgical techniques similar to
implanting an IOL during cataract surgery, except that the human lens is not
removed. The five- to twenty-minute surgical procedure to implant the ICL is
typically performed with topical anesthesia on an outpatient basis.
Management believes the use of an ICL affords a number of advantages over
existing refractive surgical procedures, such as RK and PRK, including the
following: (i) potentially corrects all levels of myopia and hyperopia, (ii) may
provide superior predictability of results, (iii) in most cases allows for
reversibility, which is precluded by existing surgical procedures, (iv) enables
faster recovery of vision and rehabilitation, and (v) produces potentially
superior refractive results.
The Company commenced commercial sales of ICLs in late 1996 on a limited basis
in South Africa, China, and selected countries in Europe and South America. In
February, 1997, the FDA granted the Company an IDE to
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commence clinical studies consisting of three distinct phases within the United
States. The first phase of the IDE permits the Company to implant ten ICLs for
myopia and ten ICLs for hyperopia. No assurance can be given as to when or if
the FDA will grant approval to expand the study to the second or third phase or
as to when or if the FDA will grant pre-market approval for the ICL. See
"Uncertainties and Risk Factors - Government Regulation and Uncertainty of
Product Approval" in Item 7.
VISCOELASTIC SOLUTION PRODUCTS. Viscoelastic solution is a gel-like substance
which can be used during IOL and ICL surgery to assist the ophthalmic surgeon in
establishing and maintaining the space and shape of the anterior and posterior
chambers of the eye. It also acts as a resilient buffer to protect against
inadvertent damage to the vital endothelial cells in the eye. Viscoelastic
solution is also effective as a lubricant for injection of foldable IOLs and
ICLs using minimally invasive surgical procedures. The Company believes it can
effectively market its STAARVISC(TM) hyaluronic acid-based viscoelastic solution
in conjunction with its foldable IOL and ICL products.
The Company introduced its STAARVISC(TM) viscoelastic solution in late 1996 for
commercial sale on a limited basis in Canada and selected countries in Europe
and South America. The only significant pending action necessary to obtain FDA
pre-market approval to commercially market STAARVISC(TM) within the United
States is satisfaction of FDA regulations pertaining to Good Manufacturing
Practices. The Company intends to arrange an FDA inspection of its STAARVISC(TM)
manufacturing facilities in mid-1997 in order to satisfy this final requirement.
See "Uncertainties and Risk Factors - Government Regulation and Uncertainty of
Product Approval" in Item 7.
RESEARCH AND DEVELOPMENT
The Company is focused on furthering technological advancements in the
ophthalmic products industry through continuous development and innovation of
ophthalmic products and materials, and related surgical techniques to promote
these products. See "Business - Strategy" above. The Company maintains an
active internal research and development program comprised of over 25 employees.
Over the past year, research and development efforts have been primarily focused
on: (i) developing the Company's ICLs, Glaucoma Wick and toric IOL, (ii)
improving insertion and delivery systems for the Company's foldable IOLs, and
(iii) generally improving the manufacturing systems and procedures for all
products to reduce manufacturing costs. Research and development expenses
amounted to approximately $4,085,000, $3,254,000 and $2,718,000 for the
Company's 1996, 1995 and 1994 fiscal years, respectively.
MARKETING, SELLING AND DISTRIBUTION
The Company maintains a highly trained sales force that works closely with its
customers (primarily surgeons and other health care providers) to educate them
on the benefits of its IOLs as well as the skills and techniques needed to
perform minimally invasive surgical procedures. The Company supplements its
direct sales efforts through advertising in medical and trade journals and by
sponsoring surgical procedure courses, seminars and technical presentations
chaired by leading ophthalmologists.
The Company's products are sold domestically through a network of independent
regional manufacturers representatives and their territorial representatives.
International sales are primarily conducted through the Company's subsidiaries
that sell through independent sales representatives engaged on a basis similar
to that of sales representatives within the United States. In countries where
the Company's subsidiaries do not have a direct presence, sales are conducted
through country or area medical distributors.
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COMPETITION
Competition in the medical device field is intense and characterized by
extensive research and development and rapid technological change. Development
by competitors of new or improved products, processes or technologies may make
the Company's products obsolete or less competitive. The Company will be
required to devote continued efforts and significant financial resources to
enhance its existing products and/or develop new products for the ophthalmic
industry. See "Uncertainties and Risk Factors - Highly Competitive Industry;
Rapid Technological Change" in Item 7.
The Company believes its primary competition for foldable IOLs includes Allergan
Medical Optics ("AMO"), a subsidiary of Allergan, Inc. ("Allergan"), Chiron
Vision Corporation ("Chiron"), a subsidiary of Chiron Corporation, and Alcon
Surgical, Inc. ("Alcon"), a subsidiary of Alcon Laboratories, Inc., all of whom
are licensees of the Company's foldable technology. Significant competitors in
the hard IOL market are believed to include Chiron, AMO, Pharmacia & Upjohn,
Inc. ("Pharmacia & Upjohn"), Alcon, Storz Ophthalmics, Inc. ("Storz"), a
subsidiary of American Home Products, and Mentor Corporation.
The Company's primary competition for glaucoma products is from pharmaceutical
companies. The Company believes Merck & Company, Inc., Alcon, Allergan, and
Storz are the largest providers of glaucoma drugs within the United States, and
CIBA Vision Corporation, a subsidiary of CIBA-GEIGY Corporation, Pharmacia &
Upjohn and Lederle Laboratories, a subsidiary of American Home Products, are the
largest internationally. The portion of this market held by glaucoma devices is
insignificant at present.
The Company will face significant competition for its ICLs generally from
manufacturers and distributors of corrective eyeglasses and external contact
lenses, and particularly from providers of conventional and laser surgical
procedures. The Company believes its primary competitors for laser surgical
procedures are Summit Technology, Inc. ("Summit"), VISX, Incorporated ("VISX"),
Escalon Medical, Inc., Sunrise Medical, Chiron and Nidek Co., Ltd. Summit's and
VISX's excimer lasers for PRK are the only products which have received pre-
market approval from the FDA for sale within the United States. KeraVision,
Inc. is developing the corneal ring.
Pharmacia & Upjohn, which distributes and manufactures a hyaluronic-based
viscoelastic solution known as Healon(TM), is the primary competitor for this
product. Other companies such as AMO, Chiron, Alcon and Storz also sell
viscoelastic type products.
MANUFACTURING AND SUPPLIERS
The Company principally manufactures its IOLs at its facilities located in
California, and its Glaucoma Wick, ICLs and STAARVISC(TM) viscoelastic solution
at its facilities located in Switzerland. Many components of the Company's
products are purchased to its specifications from suppliers or subcontractors.
Most of these components are standard parts available from multiple sources at
competitive prices. The Company presently has one supplier of silicone, the
principal raw material for its lenses, although it can purchase this raw
material from several distributors. Similarly, certain items used by the
Company in its disposable surgical packs are provided by a single supplier. The
Company's PHACO XL(TM) phacoemulsification machine is being manufactured for the
Company by unaffiliated third parties. If any of these supply sources becomes
unavailable, the Company believes that it would be able to secure alternate
supply sources within a short period of time and with minimal or no disruption.
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LICENSES AND DISTRIBUTION RIGHTS
The Company has granted licenses to certain of its patents, products, trade
secrets and technology, including its foldable technology, to other companies in
the IOL industry. The licenses under the patents extend for the life of the
patents. The licensees include Optical Radiation Corporation ("ORC"), Chiron,
AMO, Alcon and Canon STAAR, a joint venture owned equally by the Company and
Canon, Inc. and Canon Sales Co., Inc. Included in some of the licenses granted
are licenses to certain of the Company's foldable patents which were granted on
an exclusive basis to Canon STAAR (for Japan only), on a non-exclusive basis to
Alcon, ORC, Chiron and Canon STAAR (with respect to the world other than Japan),
and on a co-exclusive basis to AMO. At the time these licenses were granted,
the Company received substantial pre-payments of royalties on all but one of the
licenses. The pre-payment period on many of these licenses have since lapsed or
will lapse in the near future. The Company's business strategy is not dependent
upon realizing royalties from these licenses in the future.
In view of the number of licenses granted to its competitors, the Company is
often subject to disputes regarding the requirements of the licenses. The
Company and its licensee, Allergan, are currently in litigation with Pharmacia &
Upjohn for infringement of the Mazzocco Patent. The Company is also in
litigation with Chiron on the basis of a dispute regarding an indemnification
clause set forth in an agreement between the Company and Chiron and the payment
of royalties. The impact of an adverse decision in either case is unknown at
this time. See "Pending Legal Proceedings" in Item 3 below.
In May 1995, IRTC granted an exclusive royalty bearing license to STAAR Surgical
AG to manufacture, use and sell the glaucoma devices in the United States,
Europe, Latin America, Africa, Asia and Japan, and non-exclusive rights with
respect to the countries in the Commonwealth of Independent States (or former
Union of Soviet Socialists Republics) and China. In January 1996, IRTC granted
an exclusive royalty bearing license to STAAR Surgical AG to manufacture, use
and sell ICLs using its biocompatible materials in the United States, Europe,
Latin America, Africa, Asia and Japan, and non-exclusive rights with respect to
the Commonwealth of Independent States. The terms of these licenses extend for
the life of the patents. In connection with these licenses, IRTC also assigned
its patent for its biocompatible material for IOLs and ICLs to the Company. The
Company has since adopted IRTC's biocompatible material and glaucoma device
design for the Company's Glaucoma Wick, and has incorporated IRTC's
biocompatible materials for use with the Company's proprietary ICL design.
SUBSIDIARIES
The Company's principal operating subsidiary is STAAR Surgical AG, a wholly
owned subsidiary formed in Switzerland to develop, manufacture and distribute
worldwide certain of the Company's products, including its Glaucoma Wick and
ICLs. The Company and STAAR Surgical AG have also formed six other direct or
indirect wholly owned operating subsidiaries for the purpose of distributing and
marketing the Company's products internationally, including STAAR Surgical -
Canada, Ltd. and STAAR Surgical Australasia Pty., Ltd., formed by the Company in
1994, and STAAR Surgical France - SARL, STAAR Surgical - South Africa Pty.,
Ltd., STAAR Surgical Austria, GmbH; and STAAR Surgical Germany, GmbH, formed by
STAAR Surgical AG in 1993 through 1995.
The Company also owns a 50% interest in Canon STAAR, a joint venture between the
Company and Canon, Inc. and Canon Sales Co., Inc. for the manufacture, marketing
and distribution of IOLs in Japan.
The Company also owns an interest in a number of subsidiaries which are not
presently conducting business, including STAAR International, Inc., Lynell
Medical Technologies, Inc., STAAR of Connecticut, Inc., and
10
<PAGE>
STAAR Surgical - Singapore Pty. Ltd. The Company also owns a 50% interest in
each of Newlensco and Softlensco, inactive corporations formed in connection
with certain licensing transactions for the sole purpose of holding title to
certain filings with the FDA and pre-market approvals of the licensed products
and technologies.
FACILITIES
The Company's executive offices and its principal manufacturing and warehouse
facilities, consisting of approximately 76,000 square feet, are located in
Monrovia, California. The Company also maintains complete laboratory facilities
at this location. STAAR Surgical AG has approximately 11,000 square feet of
manufacturing, distribution and research and development facilities located in
Switzerland. STAAR Surgical France - SARL, STAAR Australasia, Pty., Ltd., STAAR
Surgical South Africa, Pty., Ltd., and STAAR Surgical Austria, GmbH, each also
have distribution facilities. Canon STAAR Co., Inc. has an approved
manufacturing facility in Japan.
The Company believes that its existing facilities have been adequate for its
needs, and will continue to be adequate for existing levels of operations. The
Company expects no difficulties in renewing leases, or replacing or making
additions to its existing facilities or in establishing new facilities.
EMPLOYEES AND LABOR RELATIONS
The Company and its subsidiaries had a total of 255 employees as of January 3,
1997, including 49 in administration, 40 in marketing and sales, 25 in research
and development and technical services and 141 in manufacturing, quality control
and shipping. The Company and its subsidiaries are non-unionized. The Company
believes that its relations with its employees are good.
INTELLECTUAL PROPERTY RIGHTS
The Company and/or its licensors have pending patent applications and issued
patents in various countries relating specifically to the Company's products or
various aspects thereof, including the Company's core patent (the "Mazzocco
Patent") relating to methods of folding or deforming a foldable IOL or ICL for
use in minimally invasive surgery. The Mazzocco Patent was granted by the
United States Patent Office in March 1986 to Dr. Thomas Mazzocco, M.D., a
practicing ophthalmologist and a co-founder of the Company. The Company has
since obtained patent protection for the Mazzocco Patent or made application for
such protection in certain foreign countries. The Company has also received an
assignment from IRTC of its patents for glaucoma devices and biocompatible
material for IOLs.
The Company has obtained a registered trademark on the mark STAAR and associated
logo. The Company also has common law trademark rights to a number of other
marks and has also applied for registration for a number of these marks.
An adverse decision from a Court of competent jurisdiction affecting the
validity or enforceability of the Company's patents (principally the Company's
core Mazzocco Patent) or proprietary rights owned by or licensed to the Company
could have, depending generally on the economic importance of the country or
countries to which such patents or proprietary rights relate, an adverse effect
on the Company and on its business prospects. Legal costs relating to
prosecuting or defending patent infringement litigation may be substantial.
Costs of litigation related to successful prosecution of patent litigation are
capitalized and amortized over the estimated useful life of the relevant patent.
There can be no assurance that the Company will be able to successfully defend
11
<PAGE>
its patents and proprietary rights in the future. See "Uncertainties and Risk
Factors - Patents and Proprietary Right." in Item 7.
REGULATORY REQUIREMENTS
The Company's products are subject to regulatory approval or clearance in both
the United States and in foreign countries. The following discussion outlines
the various kinds of reviews to which the Company's products or facilities may
be subject.
CLINICAL REGULATORY REQUIREMENTS WITHIN THE UNITED STATES. Most of the
Company's products are subject to regulation as medical devices by the FDA,
requiring FDA approval or clearance before they can be sold within the United
States, and mandating continuous compliance of the Company's manufacturing
facilities and distribution procedures with FDA regulations, including "Good
Manufacturing Practices."
Initial approval or clearance of medical devices for sale is subject to
differing levels or types of FDA review and evaluation depending on the
classification of the device under the Food, Drug and Cosmetic Act ("FD&C Act")
and whether the use of the medical device can be demonstrated to be
substantially equivalent to a directly related medical device in commerce prior
to May 1976 (the month and year of enactment of the FD&C Act).
Pursuant to the FD&C Act, medical devices are classified as either Class I,
Class II or Class III devices. If classified as a Class I device, the medical
device will be subject only to general controls which are applicable to all
devices. Such controls include regulations regarding FDA inspections of
facilities, "Good Manufacturing Practices," labeling, maintenance of records and
filings with the FDA. If classified as a Class II device, the medical device
must also meet general PERFORMANCE standards established by the FDA. If
classified as a Class III device, the applicant must present sufficient data
derived through clinical studies demonstrating the product's safety, reliability
and effectiveness.
FDA approval for a Class III device such as an IOL or ICL implant begins with
the submission of an application for an Investigational Device Exemption or IDE
which, if granted, will permit the implantation of a limited number of IOLs or
ICLs (typically less than 100) on a clinical study basis. Based upon the
results from the initial core population, the FDA will then allow an additional
core study to be performed, typically 500 to 700 implants. The complete
clinical results will then be reviewed by an FDA advisory panel of outside
experts. If the advisory panel approves the product based upon the results, the
FDA will then generally grant pre-market approval assuming satisfaction of its
other requirements. The grant of an IDE, the performance of clinical studies,
the submission of an application for pre-market approval, and advisory panel
approval, may take three to ten years depending, in part, upon the complexity of
the medical device.
A medical device that is substantially equivalent to a directly related medical
device previously in commerce may be eligible for abbreviated FDA pre-market
notification "510(k) review" process. The review period and FDA determination
as to substantial equivalence should be made within 90 days of submission of a
510(k) application, unless additional material, information or clarification is
requested or required by the FDA. As a practical matter, the review process and
FDA determination often take significantly longer than 90 days depending, in
part, upon the complexity of the medical device. FDA 510(k) clearance is a
"grandfather" process. As such, FDA clearance does not imply that the safety,
reliability and effectiveness of the medical device has been approved or
validated by the FDA, but merely means that the medical device is substantially
equivalent to a previously cleared commercially-related medical device.
The Company's IOLs, ICLs, lens injectors, Glaucoma Wick, Glaucoma Shunt, and
STAARVISC(TM) viscoelastic solution are Class III devices, and its
phacoemulsification equipment, ultrasonic cutting tips and surgical packs are
12
<PAGE>
Class II devices. The Company has received FDA pre-market approval for its IOLs
(other than its toric version), and FDA 510(k) clearance for its Glaucoma Shunt,
phacoemulsification equipment, lens injectors, ultrasonic cutting tips and
surgical packs. The Company is presently conducting clinical studies under an
IDE for its Toric IOL. The Company has received an IDE to commence limited
clinical studies for its ICLs. The only significant pending requirement for the
Company to obtain pre-market approval of its STAARVISC(TM) viscoelastic solution
is the inspection and approval by the FDA of the Company's manufacturing
facilities for Good Manufacturing Practices. The Company intends to apply to
the FDA in mid-1997 for 510(k) clearance for its Glaucoma Wick.
The Company is also subject to mandatory Medical Device Reporting ("MDR")
regulations which obligate the Company to provide information to the FDA on
injuries alleged to have been associated with the use of a product or in
connection with certain product failures which could cause injury
CLINICAL REGULATORY REQUIREMENTS IN FOREIGN COUNTRIES. There is a wide
variation in the approval or clearance requirements necessary to market products
in foreign countries. The requirements range from virtually no requirements to
a level comparable to or even greater than those of the FDA. For example, many
countries in South America have minimal regulatory requirements, while many
developed countries, such as Japan and Germany, have conditions at least as
stringent as those of the FDA. FDA acceptance is not always a substitute for
foreign government approval or clearance.
The member countries of the European Economic Union (the "Union") currently
permit, and by 1998 will require, all medical products sold within their borders
to carry a "CE" marking. The CE marking denotes that the applicable medical
device has been found to be in compliance with guidelines concerning
manufacturing and quality control, technical specifications and
biological/chemical and clinical safety. The CE marking supersedes all current
medical device regulatory requirements for Union countries. The Company has an
ongoing program in place to ensure compliance with the applicable requirements.
The Company has obtained the CE mark for its IOLs (other than its toric IOL) and
lens injectors, and anticipates obtaining the CE marking for its Glaucoma Wick,
ICLs and STAARVISC(TM) viscoelastic solution by 1998.
OTHER REGULATORY REQUIREMENTS. Sales of the Company's products may be affected
by health care reimbursement practices. For example, in January 1994, the
Health Care Financing Administration ("HCFA") adopted rules that limit medicare
reimbursement for IOLs implanted in ambulatory surgical centers to a flat fee of
$150. HCFA's medicare reimbursement rate for IOLs implanted in hospitals was
set at $150 plus 50% of cost.
The Company is also subject to various federal, state and local laws applicable
to its operations including, among other things, working conditions, laboratory
and manufacturing practices, and the use and disposal of hazardous or
potentially hazardous substances used in connection with research work. The
extent of government regulation which might result from future legislation or
administrative action and their potential adverse impact on the Company cannot
be accurately predicted.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
----------------------------------------------------------------------
SALES
-----
Approximately $29,592,000, $26,561,000 and $23,091,000 in the Company's overall
revenues were generated in the United States for its 1996, 1995 and 1994 fiscal
years, respectively, constituting approximately 70%, 77% and 84% of its overall
revenues for such fiscal years, respectively. Sales to Europe, which is the
Company's principal foreign market, generated approximately $7,576,000,
$4,841,000 and $3,361,000 in revenues for the Company's 1996, 1995 and 1994
fiscal years, respectively, constituting approximately 20%, 14% and 12% of the
Company's overall revenues for such respective fiscal years. The balance of the
Company's foreign sales were distributed amongst the Asian/Pacific, Middle
Eastern, South African and South American geographic areas. Substantially
13
<PAGE>
all products sold in 1996 were manufactured in the United States.
ITEM 2. PROPERTIES
The Company's executive offices and its principal manufacturing and warehouse
facilities are in Monrovia, California, in leased industrial buildings of
approximately 76,000 square feet. The leases expire between 1998 and 2002, and
currently require aggregate payments of $31,008 per month. The Company also
maintains complete laboratory facilities in these buildings. Certain of the
Company's subsidiaries lease facilities dedicated to manufacturing, distribution
and research and development activities. Canon STAAR Co., Inc. has an approved
manufacturing facility in Japan. See "Narrative Description of Business -
Facilities," in Item 1 above.
ITEM 3. PENDING LEGAL PROCEEDINGS
CHIRON VISION CORPORATION VS. STAAR SURGICAL COMPANY, AND RELATED CROSS-
COMPLAINT; LOS ANGELES SUPERIOR COURT CASE NO. BC 149557
On May 7, 1996, Chiron Vision Corporation ("Chiron") filed a complaint for
damages against the Company for specific performance, contractual indemnity,
declaratory relief, accounting, and breach of contract arising from a business
agreement dated March 8, 1990 between the parties. This agreement (the "Master
Terms Agreement") governs a number of associated business agreements relating to
research, development, licensing, manufacture and sale of patented and
proprietary IOLs and related products, processes, surgical instruments and
developments related thereto. The Company filed its answer to Chiron's
complaint on September 5, 1996. and filed a Cross-Complaint for specific
performance, contractual indemnity, declaratory relief, accounting and breach of
contract. On February 19, 1997, Chiron filed its Amended Complaint for specific
performance, contractual indemnity, declaratory relief, accounting, breach of
contract, intentional misrepresentation and negligent misrepresentation. A
response to the Amended Complaint is due on or before March 19, 1997. The
principal claims and cross-claims generally relate to whether the Company is
obligated to indemnify Chiron under the Master Terms Agreement and related
license agreements with respect to certain third-party litigation, and whether
Chiron has, among other things, breached its obligation to pay certain royalties
under these agreements as well as certain obligations pertaining to the sale or
transfer of licensed technology and patents. The lawsuit is currently in the
initial stage of discovery. The Company believes that it will prevail in this
suit. Nevertheless, the outcome of the litigation is uncertain, and the effect
of an unfavorable outcome is unknown at this time.
ALLERGAN SALES, INC. AND STAAR SURGICAL COMPANY VS. PHARMACIA & UPJOHN, INC.,
AND RELATED COUNTERCLAIMS; CIVIL ACTION NO. 96-1430 H (JFS); UNITED STATES
DISTRICT COURT, SOUTHERN DISTRICT OF CALIFORNIA
In August 1996, Allergan Sales, Inc. ("Allergan Sales"), a licensee of the
Company's Mazzocco Patent, filed suit against Pharmacia & Upjohn, Inc.
("Pharmacia & Upjohn") for infringement of the Mazzocco Patent. In a First
Amended Complaint filed on September 6, 1996, the Company joined as a co-
plaintiff with respect to the infringement action. On November 11, 1996,
Pharmacia & Upjohn filed an Answer to the First Amended Complaint, and filed a
Cross-Complaint for declaratory judgment of non-infringement, invalidity,
unenforceability and anti-trust violation. Allergan Sales and the Company filed
a Second Amended Complaint for patent infringement on January 16, 1997, which
was answered by Pharmacia & Upjohn pursuant to Stipulation the same date. In
related proceedings the District Court granted a temporary injunction on
September
14
<PAGE>
17, 1996, and a preliminary injunction on October 22, 1996, against Pharmacia &
Upjohn. On November 7, 1996, Pharmacia & Upjohn filed a Notice of Appeal of the
order granting the preliminary injunction and, in connection therewith, an
Emergency Motion for Stay. The Court of Appeals issued the Emergency Stay
pending further determination by the District Court. The lawsuit is currently in
the initial stage of discovery. The Company believes that it will prevail in
this suit. Nevertheless, the outcome of the litigation is uncertain, and the
effect of an unfavorable outcome is unknown at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the quarter
ended January 3, 1997.
PART II
-------
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The Company's Common Stock is quoted on the National Association of Securities
Dealers Automatic Quotation ("NASDAQ") National Market under the symbol "STAA."
The following table sets forth the reported high and low sale prices and volume
of trading of the Common Stock as reported by NASDAQ for the calendar periods
indicated:
<TABLE>
<CAPTION>
PERIOD HIGH LOW
------ ---- ---
<S> <C> <C> <C>
1996: Fourth Quarter..................... $14.375 $10.375
Third Quarter...................... 16.500 11.875
Second Quarter..................... 17.875 12.375
First Quarter...................... 14.750 9.875
1995: Fourth Quarter..................... $12.675 $ 9.875
Third Quarter...................... 12.750 8.250
Second Quarter..................... 11.375 7.500
First Quarter...................... 13.125 7.875
1994: Fourth Quarter..................... $ 7.250 $ 4.500
Third Quarter...................... 6.125 4.125
Second Quarter..................... 7.000 3.625
First Quarter...................... 5.250 3.325
</TABLE>
The last reported sale price for the Company's Common Stock on the NASDAQ
National Market on March 26, 1997 was $10.875 per share. As of March 26, 1997,
there were approximately 1,347 record holders of the Common Stock.
The Company has not paid any cash dividends on its Common Stock since its
inception. The Company currently anticipates that all income will be retained to
develop further the Company's business and that no cash dividends on the Common
Stock will be declared in the foreseeable future.
15
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company with respect to the Company's five most recent fiscal years ended
January 3, 1997, December 29, 1995, December 30, 1994, December 31, 1993 and
January 1, 1993. The selected consolidated statement of operations data set
forth below for each of the three fiscal years in the period ended January 3,
1997, and the selected consolidated balance sheet data set forth below at
January 3, 1997 and December 29, 1995, are derived from the Consolidated
Financial Statements of the Company which have been audited by BDO Seidman, LLP,
independent certified public accountants, as indicated in their Report which is
included elsewhere in this Report. The selected consolidated statement of
operations data set forth below for each of the two fiscal years in the period
ended December 31, 1993, and the consolidated balance sheet data set forth below
at December 30, 1994, December 31, 1993 and January 1, 1993, are derived from
the Company's audited consolidated financial statements not included elsewhere
in this Report. The selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements of the Company, the Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 7, included elsewhere in this Report.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------
JANUARY DECEMBER DECEMBER DECEMBER JANUARY
3, 29, 30, 31, 1,
1997 1995 1994 1993 1993
------- ------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales......................................................... $41,213 $34,180 $26,333 $19,603 $10,198
Royalty income................................................ 1,000 514 1,020 473 ---
------- ------- ------- ------- -------
Total revenues............................................. 42,213 34,694 27,353 20,076 10,198
Cost of sales................................................. 10,196 8,441 6,059 3,980 3,257
------- ------- ------- ------- -------
Gross profit............................................... 32,017 26,253 21,294 16,096 6,941
Costs and expenses:
General and administrative................................. 5,628 5,000 4,365 4,907 5,166
Marketing and selling...................................... 12,227 10,911 8,694 6,998 4,949
Research and development................................... 4,085 3,254 2,718 2,260 1,532
------- ------- ------- ------- -------
Total costs and expenses................................ 21,940 19,165 15,777 14,165 11,647
Operating income (loss)....................................... 10,077 7,088 5,517 1,931 (4,706)
Other income (expense)........................................ 153 303 625 685 (351)
------- ------- ------- ------- -------
Income (loss) before income taxes............................. 10,230 7,391 6,142 2,616 (5,057)
Income tax provision (benefit)(1)............................. 3,339 (91) (2,184) 81 (19)
------- ------- ------- ------- -------
Net income (loss)............................................. $ 6,891 $ 7,482 $ 8,326 $ 2,535 $(5,076)
======= ======= ======= ======= =======
Fully diluted net income (loss)
before income taxes per share................................ $0.74 $0.54 $0.45 $0.20 $(0.50)
======= ======= ======= ======= =======
Fully diluted net income (loss) per share..................... $0.50 $0.55 $0.62 $0.20 $(0.50)
======= ======= ======= ======= =======
Weighted average number of fully diluted shares............... 13,867 13,715 13,500 12,859 10,191
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Working capital............................................... $15,485 $16,335 $14,166 $ 7,354 $ 4,239
Total assets.................................................. 51,119 38,803 28,888 18,776 12,826
Notes payable and current portion of long-term debt........... 8,193 4,029 1,792 1,634 638
Long-term debt................................................ 844 1,212 572 0 0
Stockholders' equity.......................................... $36,604 $28,678 $22,029 $11,986 $7,317
</TABLE>
(1) Includes recognition of deferred tax asset of $2.4 million for 1994 and
$900,000 for 1995. See Note 7 to the Company's Consolidated Financial
Statements.
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OVERVIEW
The Company develops, manufactures and globally distributes medical devices used
in minimally invasive ophthalmic surgery. The Company's primary products are its
foldable IOLs, its Glaucoma Wick, its ICLs and its STAARVISC(TM) viscoelastic
solution. The Company markets its IOLs, which accounted for 94% of its revenues
in 1996, both domestically and in numerous foreign countries. The Company
markets the Glaucoma Wick, which the Company introduced in late 1995, and its
ICLs and STAARVISC(TM) viscoelastic solution, which the Company introduced in
late 1996, on a limited basis in selected foreign countries.
The Company has marketed its foldable IOLs internationally since 1986 and, in
September 1991, following a lengthy period of clinical studies, received FDA
pre-market approval to fully market the Company's ELASTIC(TM) and ELASTIMIDE(TM)
foldable IOL models within the United States. Since that time, the Company's
total revenues increased from $10.2 million in its 1992 fiscal year to $42.2
million in its 1996 fiscal year, representing a compound annual growth rate of
43%. The Company also receives royalty income with respect to certain of its
licensed technologies, although it does not consider the royalty income to be
material to its current or prospective financial condition.
International revenues represented 30% of total revenues for the 1996 fiscal
year, up from 10.7% for the 1992 fiscal year. The mix of the Company's revenues
and profits, on both a product and geographic basis, will be affected by the
continued introduction and acceptance of the Company's Glaucoma Wick, ICLs and
STAARVISC(TM) viscoelastic solution in various markets worldwide, including the
United States. Sales of the Company's Glaucoma Wick and ICLs will be limited to
the international market until such products receive United States FDA approval.
The Company's long-term objective is to increase international revenues to
account for one-half of total revenue.
The Company's principal customers are ophthalmologists, surgical centers,
hospitals, managed care providers, health maintenance organizations and group
purchasing organizations. The Company generally supplies a quantity of foldable
IOLs with different specifications to domestic customers on a consignment basis
and recognizes sales when an ophthalmic surgeon implants the consigned foldable
IOL. However, sales to foreign distributors are recognized upon shipment. The
Company typically does not have any backlog of orders, and has minimal product
returns. Ophthalmic surgeons and other providers of foldable IOLs are generally
eligible to receive reimbursements from government or private third-party
payors, such as Medicare, subject to certain limitations and pricing pressures.
The Company does not expect that ICLs will be eligible for, and there can be no
assurance that the Glaucoma Wick will be eligible for, reimbursement by
government or private third-party payors.
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented by
certain items reflected in the Company's income statement for the period
indicated and the percentage increase or decrease in such items over the prior
period.
17
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL REVENUES PERCENTAGE CHANGE
-------------------------------------------- -------------------
FISCAL
FISCAL YEAR ENDED YEAR
-------------------------------------------- ----------
1996 1995
JANUARY 3, DECEMBER 29, DECEMBER 30, VS VS
1997 1995 1994 1995 1994
----------- -------------- ------------- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues................................... 100.0% 100.0% 100.0% 21.7% 26.8%
Cost of sales.................................... 24.2 24.3 22.1 20.8 39.3
----- ----- -----
Gross profit..................................... 75.8 75.7 77.9 22.0 23.3
Costs and expenses:
General and administrative.................... 13.3 14.4 16.0 12.6 14.6
Marketing and selling......................... 29.0 31.5 31.8 12.1 25.5
Research and development...................... 9.7 9.4 9.9 25.5 19.7
----- ----- -----
Total costs and expenses................... 52.0 55.3 57.7 14.5 21.5
Operating income................................. 23.9 20.4 20.2 42.2 28.5
Other income, net................................ 0.4 0.9 2.3 (49.5) (51.5)
----- ----- -----
Income before income taxes....................... 24.2 21.3 22.5 38.4 26.8
Income tax provision (benefit)................... 7.9 (0.3) (8.0) --- (95.8)
----- ----- -----
Net income....................................... 16.3% 21.6% 30.5% (7.9)% (10.1)%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED JANUARY 3, 1997 COMPARED TO FISCAL YEAR ENDED DECEMBER 29,
1995
REVENUES. Revenues for the year ended January 3, 1997 were $42.2 million,
representing a 21.7% increase over $34.7 million in revenues for the prior year
ended December 29, 1995. The increase in revenues was principally attributable
to the continued growth in unit sales of the Company's primary products, its
foldable IOLs, in both the domestic and international markets, partially offset
by certain domestic price decreases due to competitive pressures. Increases in
unit volume are attributable, in significant part, to the continuing conversion
of the cataract market to foldable IOLs (according to industry statistics,
approximately 50% of all cataract surgeries performed in the United States in
1996 used foldable IOLs as compared to 37% in 1995). Revenues from international
sales increased to 30% of total revenues for the year ended January 3, 1997, as
compared to 24% for the prior fiscal year, reflecting the Company's increased
efforts to develop international markets, as well as the conversion of these
markets to foldable IOLs. Also included in revenues for the year ended January
3, 1997 are international sales of $625,000 resulting from the commercial
introduction in selected foreign markets of the Company's Glaucoma Wick at the
end of 1995 and its ICLs and STAARVISC(TM) viscoelastic solution at the end of
1996. Revenues from royalties also increased from $500,000 for 1995 to $1
million for 1996.
COST OF SALES. Cost of sales as a percentage of revenues for the year ended
January 3, 1997 declined slightly to 24.2% of revenues as compared 24.3% for the
prior year. The principal reasons for this slight decline were increased
operating efficiencies and economies of scale from increased sales volume. These
savings were offset by price decreases resulting from competitive pressures and
a product mix change due to an increased demand for the ELASTIMIDE(TM)IOL, which
is relatively more expensive to manufacture.
GENERAL AND ADMINISTRATIVE. General and administrative expense for the year
ended January 3, 1997 was $5.6 million, or 13.3% of revenues, as compared to $5
million, or 14.4% of revenues, for the prior year. The decline in general and
administrative expense as a percentage of revenues was attributable to the
significant growth in overall revenues permitting greater absorption of general
and administrative costs. The increase in general
18
<PAGE>
and administrative expense in dollar terms was attributable to additional
administrative infrastructure expenditures required to support the increase in
revenues.
MARKETING AND SELLING. Marketing and selling expense for the year ended January
3, 1997 was $12.2 million, or 29.0% of revenues, as compared to $10.9 million,
or 31.5% of revenues, for the prior year. The decline in marketing and selling
expense as a percentage of revenues was attributable to the significant growth
in overall revenues permitting greater absorption of fixed marketing and selling
(i.e., non-commission) costs. The increase in marketing and selling expense in
dollar terms was principally attributable to greater commissions paid arising
from increased sales revenues.
RESEARCH AND DEVELOPMENT. Research and development expense for the year ended
January 3, 1997 was $4.1 million, or 9.7% of revenues, as compared to $3.3
million, or 9.4% of revenues, for the prior year. This increase was attributable
to the Company's continued investment in developing new products, manufacturing
systems and distribution systems, cost reduction projects for manufacturing, and
increased costs incurred conducting clinical studies in the United States.
OTHER INCOME, NET. Other income for the year ended January 3, 1997 was
$153,000, or 0.4% of revenues, as compared to $303,000, or 0.9% of revenues, for
the prior year. The primary reasons for this decrease were increased interest
expenses, losses in translating foreign currency, and a decline in deferred
revenue arising from the sale of a license to the Canon STAAR joint venture.
The deferred revenue reported in 1996 is the last portion of total deferred
revenue realized with respect to the Canon STAAR license.
INCOME TAX PROVISION (BENEFIT). Income taxes increased to a provision of $3.3
million for the year ended January 3, 1997 from a benefit of $100,000 for the
year ended December 29, 1995. 1996 is the first year the Company has reported an
income tax provision without having offsets related to net operating loss
carryforwards. However, the Company will not pay any significant Federal income
taxes until it fully utilizes the remaining $2.5 million of net operating loss
carryforwards for tax purposes. The Company fully utilized its net operating
loss carryforwards for state taxes in 1995. The Company has recorded a deferred
tax asset of $1.3 million as of January 3, 1997. Management believes expected
future income levels should result in full recognition of the deferred tax
asset. See Note 7 to the Consolidated Financial Statements.
FISCAL YEAR ENDED DECEMBER 29, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
1994
REVENUES. Revenues for the year ended December 29, 1995 were $34.7 million,
which was 26.8% greater than the $27.4 million in revenues for the prior year
ended December 30, 1994. The increase in sales revenues was attributable to a
combination of interrelated factors, including: (i) increased domestic demand
for the Company's ELASTIMIDE(TM), and, to a lesser degree, ELASTIC(TM) foldable
IOLs due to the introduction of ultraviolet versions of these products in April
1995; (ii) increased international demand for the Company's IOLs as a result of
the Company's continued investment in its foreign distribution channels
(international revenue increased to 24% of total Company revenue for 1995, as
compared to 16% in 1994); and (iii) the continuing conversion of both the
domestic and international markets from hard IOLs to foldable IOLs (according to
industry statistics, 37% of the overall domestic IOL market at the end of 1995
was held by foldable IOLs, and, according to management estimates, 15% of the
overall international IOL market at the end of 1995 was held by foldable IOLs).
Gains in volume were partially offset by certain domestic price decreases
resulting from pressures from managed care providers. Revenues from royalties
were $500,000 in 1995 compared to $1.0 million in 1994.
COST OF SALES. Cost of sales increased to 24.3% of revenues for the year ended
December 29, 1995 compared to 22.1% of revenues for the year ended December 30,
1994. The principal reasons for this increase were: (i) lower
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pricing from certain managed care contract sales; (ii) inefficiencies associated
with the resumption of manufacturing of ultraviolet versions of the Company's
ELASTIC(TM) and ELASTIMIDE(TM)IOLs following FDA pre-market approval in the
second quarter of 1995; (iii) increased sales of the ELASTIMIDE(TM) IOL, which
is more costly to manufacture because of its design; and (iv) increased costs
associated with the start-up of manufacturing of new products in Switzerland.
GENERAL AND ADMINISTRATIVE. General and administrative expense decreased to
14.4% of revenues ($5.0 million) for the year ended December 29, 1995 from 16.0%
of revenues ($4.4 million) for the year ended December 30, 1994. This percentage
decrease resulted from management's continued efforts to control general and
administrative expenses, combined with the increase in revenues. The increase in
actual general and administrative expense was attributable to the start-up of
the Company's operations in Switzerland.
MARKETING AND SELLING. Marketing and selling expense decreased to 31.5% of
revenues ($10.9 million) for the year ended December 29, 1995 from 31.8% of
revenues ($8.7 million) for the year ended December 30, 1994. The increase in
actual marketing and selling expense was attributable to: (i) higher marketing
and selling expenses associated with the build-up of direct distribution
channels in Australia, South Africa, France and Switzerland (which translated
into a significant portion of increased international revenues for 1995); and
(ii) increased costs associated with the market introduction of the new Glaucoma
Wick and preparation for the market introduction of the ICL in selected foreign
countries. This increase in expenses was partially offset by reduced domestic
commission expenses attributable to lower pricing.
RESEARCH AND DEVELOPMENT. Research and development expense decreased to 9.4%
of revenues ($3.3 million) for the year ended December 29, 1995 from 9.9% of
revenues ($2.7 million) for the year ended December 30, 1994. The primary
reason for the increase in actual expense was the continued investment in
developing new products, manufacturing systems and distribution systems, and
cost reduction projects for manufacturing.
OTHER INCOME, NET. Other income decreased to 0.9% of revenues ($300,000) for
the year ended December 29, 1995 from 2.3% of revenues ($600,000) for the year
ended December 30, 1994. The primary reason for this decrease was reduced
earnings reported by the Company's joint venture with Canon STAAR and increased
interest expense attributable to money borrowed through STAAR Surgical AG to
set-up the Company's Swiss manufacturing facility and increased borrowings by
the Company under its line of credit. Subsequent to the 1995 year-end the
Company refinanced and increased its domestic line of credit facility with a
different lender. The Company obtained a lower interest rate under the
refinancing, which should result in lower interest expense for comparable future
borrowings.
INCOME TAX PROVISION (BENEFIT). As a result of increased operating profits,
the Company increased its deferred tax asset to $3.3 million as of December 29,
1995, up from $2.4 million as of December 30, 1994. This resulted in an income
tax benefit of $100,000 ($800,000 income tax provision, exclusive of net
operating loss benefit, offset by $900,000 recognition of deferred tax asset) in
1995, compared to $2.2 million ($200,000 income tax provision, exclusive of net
operating loss benefit, offset by $2.4 million recognition of deferred tax
asset) in 1994. As a result of the Company's positive operating results for each
of the three years ended December 29, 1995, the Company determined that deferred
tax assets of approximately $3.3 million and $2.4 million should be recognized
as of December 29, 1995 and December 30, 1994, respectively. These amounts were
based on a consideration of current and future anticipated earnings. Income
levels in 1996 and 1997 similar to those of 1995 should result in full
recognition of the deferred tax assets. The amount recorded as of December 29,
1995 includes the capitalization of the remaining balance of the Company's net
operating loss carryforwards. Management believes it is more likely than not
that the deferred tax assets will be realized in full. The Company will begin
reporting an income tax provision in 1996 that will utilize the deferred tax
assets and will result in decreased after-tax earnings and earnings per share.
However, the Company will not pay any significant Federal income taxes until it
fully utilizes the remaining $7.6 million of net operating loss carryforwards.
The Company
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fully utilized its net operating loss carryforwards for state taxes in 1995.
See Note 7 to the Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its activities over the past several years principally
from cash flow generated from operations, exercises of stock options and
warrants, credit facilities provided by institutional domestic and foreign
lenders and private placements of equity.
The Company's domestic credit facility is a line of credit, entered into in
February 1996, which allows the Company to borrow up to $5.0 million on a
revolving basis, at a rate of interest not to exceed the prime interest rate.
The loan agreement requires the Company to satisfy certain financial tests,
limits the amount of indebtedness the Company may incur to others and restricts
the payment of dividends. This line of credit expires in June 1997. Borrowings
are collateralized by substantially all of the domestic assets of the Company.
Borrowings outstanding as of January 3, 1997 were approximately $4.7 million.
The Company's foreign credit facility consists of a separate revolving line of
credit and a term loan extended in May 1994 by a Swiss bank to the Company's
subsidiary, STAAR Surgical AG. The revolving line of credit facility provides
for borrowings up to $828,000 (1.1 million Swiss Francs) at a 5.5% rate of
interest as of January 3, 1997. A commission rate of 0.25% is payable each
quarter. The line of credit does not have a termination date and is secured by
a general assignment of claims. Borrowings outstanding as of January 3, 1997
under the line of credit were approximately $790,000. Under the term loan,
STAAR Surgical AG obtained a $828,000 (1.1 million Swiss Francs) loan guaranteed
partially by the Swiss government and partially by the Company. Interest on
this loan is 6.25%, which the Company shares on an equal basis with the bank and
the Swiss government. The principal amount of this loan is required to be
repaid in four equal installments, beginning in December 1996. Borrowings by
STAAR Surgical AG under this loan outstanding as of January 3, 1997 were
approximately $619,000.
As of January 3, 1997, the Company had net working capital of approximately
$15.5 million compared to $16.3 million and $14.2 million as of December 29,
1995 and December 30, 1994, respectively. The decrease in net working capital
for the fiscal year ended January 3, 1997 was primarily attributable to a $4.2
million increase in notes payable, $5.9 million investment in patents and
licenses, and $4.3 million expended to acquire additional property and
equipment, which used cash resources, offset by a $2.8 million increase in
inventories and a $2.7 million increase in cash. The improvement in the
Company's net working capital for the fiscal year ended December 29, 1995 was
primarily attributable to increases in accounts receivable (approximately $2.2
million) and inventory (approximately $1.0 million) resulting from increased
operating activities and a $900,000 increase in the recognition of deferred tax
assets.
As of January 3, 1997, the Company had cash and cash equivalents of
approximately $6.5 million compared to $3.8 million and $3.2 million as of
December 29, 1995 and December 30, 1994, respectively. The improvement in the
Company's cash position for the year ended January 3, 1997 was primarily
attributable to net cash provided by operating activities (approximately $8.5
million) and cash provided by financing activities (approximately $5.0 million),
partially offset by cash used for the acquisition of property, plant and
equipment to establish production facilities for new products and to improve
operations for current products and reduce current manufacturing costs
(approximately $4.3 million) and to acquire patents and licenses and to fund
patent litigation (approximately $5.9 million). The improvement in the
Company's cash position for the fiscal year ended December 29, 1995 was
primarily attributable to net cash provided by operating activities ($5.0
million), cash received from the exercise of stock options and warrants
($434,000) and borrowings under the Company's credit facilities ($2.9 million).
Cash proceeds for the fiscal year ended December 29, 1995 were principally used
for working capital, for the
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acquisition of property, plant and equipment ($3.5 million), primarily for STAAR
Surgical AG's facility in Switzerland, and to acquire patents and licenses and
fund patent litigation ($2.0 million).
Cash flows from operating activities for the year ended January 3, 1997 were
approximately $8.5 million, an improvement of approximately $3.5 million from
the prior fiscal year. The increase in cash flow from operating activities was
principally attributable to the utilization of deferred tax asset of $2.0
million and an increase in depreciation and amortization of $836,000, offset by
a $271,000 decrease in operating working capital items. Cash flows from
operating activities for the fiscal year ended December 29, 1995 were $5.0
million, representing an improvement of approximately $1.0 million relative to
the fiscal year ended December 30, 1994, due to significantly improved results
from operations.
Cash used in investing activities for the year ended January 3, 1997 was $10.7
million, representing an increase of approximately $4.6 million relative to the
year ended December 29, 1995. This increase was due primarily to an increase of
$792,000 in expenditures for property and equipment and $4.0 million for patents
and licenses. Cash used in investing activities for the fiscal year ended
December 29, 1995 was $6.0 million, representing an increase of approximately
$2.0 million relative to the fiscal year ended December 30, 1994. This increase
was due to larger expenditures for property and equipment of $3.5 million,
patents and licenses of $2.0 million, and other assets of $600,000.
Cash flows from financing activities for the year ended January 3, 1997 were
$5.0 million, representing an increase of approximately $3.4 million relative to
the year ended December 29, 1995. This increase was principally attributable to
increased net borrowings of approximately $1.4 million, increased exercises of
stock options of $584,000, and decreased expenditures to repurchase Common Stock
(approximately $315,000, as compared to $1.6 million for the prior fiscal year).
Cash flows from financing activities for the fiscal year ended December 29, 1995
decreased by approximately $290,000 relative to the fiscal year ended December
30, 1994. This decrease was principally due to payments made by the Company in
connection with the repurchase of its Common Stock of $1.6 million, and reduced
issuance of Common Stock resulting in relatively lower proceeds in 1995 of
$600,000, offset by an increase in borrowings of $2.1 million under the
Company's credit facilities.
As of January 3, 1997, the Company had $828,000 due with respect to an open-
ended capital lease agreement wherein the Company leased $1.2 million in
surgical equipment. The Company's obligations under this lease agreement are
secured by a $600,000 letter of credit.
The Company's capital expenditures for the fiscal years ended January 3, 1997
and December 29, 1995 were approximately $4.3 million and $3.5 million,
respectively. All expenditures were used to upgrade existing production
equipment, to set up new production facilities for new products, and to reduce
current manufacturing costs. The Company's planned capital expenditures for
1997 are approximately $5.0 million, primarily to improve and expand the
Company's foldable IOL, ICL and Glaucoma Wick manufacturing capacity and to
reduce manufacturing costs.
Capitalized additions for patents and licenses for the fiscal years ended
January 3, 1997 and December 29, 1995 were approximately $5.9 million and $2.0
million, respectively. The Company capitalizes the costs of acquiring patents
and licenses as well as the legal costs of defending its rights to these
patents. The Company expects to spend approximately $2.0 million in 1997 for
patents and licenses.
Management believes that cash flow from operations and available credit
facilities, together with its current cash balances, will provide adequate
financial resources to finance an increase in the level of the Company's
operations, including capital expenditures, acquisitions and research and
development activities, for the foreseeable future. Should additional funding be
needed, such as for significantly increased levels of operations,
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the Company believes, so long as the financial position of the Company remains
constant, that these funds could be obtained.
FOREIGN EXCHANGE
Management does not believe that the fluctuation in the value of the dollar in
relation to the currencies of its suppliers or customers in the last three
fiscal years has adversely affected the Company's ability to purchase or sell
products at agreed upon prices. No assurance can be given, however, that
adverse currency exchange rate fluctuations will not occur in the future, which
would affect the Company's operating results. See "Uncertainties and Risk
Factors - Risks Associated with International Transactions" below.
INFLATION
Management believes inflation has not had a significant impact on the Company's
operations during the past three years.
UNCERTAINTIES AND RISK FACTORS
The Company may be subject to a number of significant uncertainties and risks
including, without limitation and without purporting to be a complete or
exhaustive list, those described below and those described elsewhere in this
Report, which may ultimately affect the Company in a manner and to a degree
which cannot be foreseen at this time.
RISKS RELATING TO COMMERCIALIZATION OF NEW PRODUCTS
The extent and pace of market acceptance of the Company's new products,
including its Glaucoma Wick, ICL and STAARVISC(TM) viscoelastic solution, will
be a function of many variables, as follows: the product's efficacy, performance
and attributes; the ability of the Company to obtain necessary regulatory
approvals; the effectiveness of marketing and sales efforts, including educating
ophthalmologists and other potential customers as to the distinctive
characteristics and benefits of these products; the rate at which
ophthalmologists attain the necessary surgical skills to implant the new
products; the ability of the Company to meet manufacturing and delivery
schedules; and product pricing. The extent and pace of market acceptance will
also depend upon general economic conditions affecting customers' purchasing
patterns. As the Glaucoma Wick and ICL are new medical devices, there is a
material risk that the marketplace may not accept or be receptive to the
potential benefits of these products. Unless and until the Company's new product
lines are accepted by the market and generating meaningful revenues and profits,
the Company's financial condition and prospects will continue to be solely
dependent upon its line of cataract products. See "Uncertainties and Risk
Factors - Government Regulation and Uncertainty of Product Approval" and
"Business - Products."
HIGHLY COMPETITIVE INDUSTRY; RAPID TECHNOLOGICAL CHANGE
Competition in the ophthalmic industry is intense and characterized by extensive
research and development and rapid technological change. The Company has
licensed certain of its patents and technologies relating to its cataract
products to competitors. Many of the Company's current and prospective
competitors have greater financial, technical and marketing resources and trade
name recognition than the Company, which may enable them to successfully develop
and/or market products based on technologies or approaches similar to those of
the Company, or develop products based on other technologies or approaches,
which are, or may be, competitive
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with the Company's products. Development by competitors of new or improved
products, processes or technologies may make the Company's products less
competitive or obsolete. The Company will be required to devote significant
financial and other resources to enhance its existing products and develop new
products for the ophthalmic industry. Competitive pressures could lead to a
decline in sales volumes of existing products, the inability to attain
sufficient market penetration for new products, or price reductions, any or all
of which could adversely affect the Company's operating and financial results.
There can be no assurance that the Company will be able to compete successfully
in the industry, particularly in view of rapid technological change. See
"Business - Competition" in Item 1.
GOVERNMENT REGULATION AND UNCERTAINTY OF PRODUCT APPROVAL
The manufacture and sale of the Company's products are subject to extensive
international and domestic regulation. In order to sell these products within
the United States, clearance or approval from the FDA is required. The FDA
clearance or approval process is expensive and time consuming, and no assurance
can be given that any of the Company's products which have not received FDA
clearance or approval to date will obtain such FDA clearance or approval on a
timely basis or at all, or without delays adversely affecting the marketing and
sale of the Company's products. Foreign regulatory requirements differ from
jurisdiction to jurisdiction and may, in some cases, be more stringent or
difficult to obtain than FDA clearance or approval. In order to sell products
in the countries comprising the European Economic Union (the "Union"), the
Company must satisfy, by no later than 1998, certain Union-wide regulatory
requirements, notwithstanding the Company's previous receipt of approvals from
member countries. No assurance can be given that the Company will obtain such
regulatory approvals on a timely basis or at all, or without delays adversely
affecting the marketing and sale of the Company's products. In addition,
clearances or approvals that have been or may be granted are subject to
continual review, which could result in product labeling restrictions,
withdrawal of products from the market or other adverse consequences.
To date, the Company has conducted clinical studies in certain foreign countries
on the feasibility of using the Glaucoma Wick for the treatment of glaucoma.
There can be no assurance that the initial clinical trial results from these
studies are necessarily indicative of future clinical trial results with respect
to the Glaucoma Wick. There can be no assurance that long-term safety and
efficacy data, when collected, will be consistent with the clinical results and
will demonstrate that the Glaucoma Wick can be used safely and successfully to
treat glaucoma in a broad segment of the patient population or on a long-term
basis. Furthermore, no assurance can be given that there will be no serious
complications or side effects, or that any such complications or side will not
impair or delay the Company's obtaining regulatory approval for the Glaucoma
Wick in the United States and other key markets.
To date, the Company has only conducted preliminary studies in certain foreign
countries on the feasibility of using the ICL for the treatment of myopia and
hyperopia. The Company has not yet developed any long-term safety or efficacy
data on the ICL. There can be no assurance that the preliminary feasibility
results are necessarily indicative of any results of any future clinical trials.
There can be no assurance that any long-term safety and efficacy data, when
collected, will demonstrate that the ICL can be used safely and successfully to
treat myopia or hyperopia on a long-term basis. Further, no assurance can be
given that complications of ICL surgeries will not be serious or will not impair
or delay the Company in obtaining regulatory approval for the ICL in the United
States and other key markets.
In addition to the review and approval process for its products, the Company is
also subject to government regulation of its manufacturing facilities and
procedures including "good manufacturing practice" regulations promulgated by
the FDA. The Company believes it is in compliance with all applicable
regulations. However, the FDA and comparable regulatory agencies in other
countries have substantial discretion in the interpretation and enforcement of
applicable regulations. There can be no assurance that future interpretations
made by any
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regulatory bodies, including the FDA, with possible retroactive effect, will not
adversely affect the Company. Moreover, the Company could suffer a material
adverse effect from a change in these regulations. The Company cannot predict
the extent or impact of future federal, state, local or foreign legislation or
regulation. See "Business - Regulatory Requirements" in Item 1.
If as a result of FDA inspections, MDR reports or other information, the FDA
believes that the Company is not in compliance with the law, the FDA can
institute proceedings to detain or seize products, enjoin future violations,
and/or assess civil or criminal penalties against the Company and its officers
or employees. Although the Company and its products have not been the subject
of any such FDA enforcement action, any such action by the FDA could result in a
disruption of the Company's operations for an undetermined time.
PATENTS AND PROPRIETARY RIGHTS
The Company's ability to compete effectively is materially dependent upon the
proprietary nature of the designs, processes, technologies and materials owned,
used by or licensed to the Company. Although the Company attempts to protect
its proprietary property, technologies and processes through a combination of
patent law, trade secrets and non-disclosure agreements, there is no assurance
that any or all of these measures will prove to be effective. For example, in
the case of patents, there can be no assurance that existing patents granted to
the Company or its licensors will not be invalidated, that patents currently or
prospectively applied for by the Company or its licensors will be granted, or
that patents will provide significant commercial benefits. Moreover, it is
possible that competing companies may circumvent patents the Company or its
licensors have received or applied for by developing products which closely
emulate but do not infringe the Company's or its licensor's patents, and thereby
market products that compete with the Company's products without obtaining a
license from the Company. In addition to patented or potentially patentable
designs, technologies, processes and materials, the Company also relies on
proprietary designs, technologies, processes and know-how not eligible for
patent protection, and there is no assurance that competitors may not
independently develop the same or superior designs, technologies, processes and
know-how.
The Company believes that the international market for its products is as
important as the domestic market, and therefore seeks patent protection for its
products or those of its licensors in selected foreign countries. Because of
the differences in foreign patent and other laws concerning proprietary rights,
the Company's products may not receive the same degree of protection in certain
foreign countries as they would in the United States.
There can be no assurance that the Company will be able to successfully defend
its patents and proprietary rights. The invalidation or circumvention of key
patents (principally the Company's core patents for insertion of foldable or
deformable IOLs through minimally invasive surgical techniques) or proprietary
rights owned by or licensed to the Company could have an adverse effect on the
Company and on its business prospects. There can be no assurance that the
Company will not be required to defend against litigation involving the patents
or proprietary rights of others, or that licenses under such rights will be
available. Legal and accounting costs relating to prosecuting or defending
patent infringement litigation may be substantial. See "Business - Intellectual
Property Rights" in Item 1.
THIRD-PARTY REIMBURSEMENT
The Company's ability to sell its products is, in part, dependent upon policies
of government or private third-party payors regarding reimbursement to
ophthalmic surgeons with respect to their use of the Company's products. There
can be no assurance that such third-party payors will continue to authorize or
otherwise budget reimbursement for use of the Company's existing products
(principally its IOLs) at current levels. For example, reimbursement rates for
IOLs, such as that of Medicare, have declined in recent years. Changes in
policies
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regarding reimbursement for ophthalmic products or services could adversely
affect the prospects for future sales of the Company's products. The Company
does not expect that ICLs will be eligible for reimbursement, and there can be
no assurance that any of the Company's other new products will be eligible for
reimbursement by government or private third-party payors.
RISKS ASSOCIATED WITH INTERNATIONAL TRANSACTIONS
The Company sells its products internationally which subjects it to several
potential risks, including fluctuating exchange rates and regulation of fund
transfers by foreign governments, United States and foreign export and import
duties and tariffs and political instability. There can be no assurance that
any of the foregoing will not have a material adverse effect upon the business
of the Company. The Company has not previously engaged in activities to
mitigate the effects of foreign currency fluctuations, as the Company is
generally paid in U.S. dollars with respect to its international operations. If
earnings from international operations increase, the Company's exposure to
fluctuations in foreign currencies may increase, and the Company may utilize
forward exchange rate contracts or engage in other efforts to mitigate foreign
currency risks. If entered into, there can be no assurance as to the
effectiveness of such efforts in limiting any adverse effects of foreign
currency fluctuations on the Company's international operations and on the
Company's overall results of operations. See "Business" in Item 1 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Foreign Exchange" above.
PRODUCT LIABILITY CLAIMS; INSUFFICIENCY OF PRODUCT LIABILITY INSURANCE COVERAGE;
PRODUCT RECALL RISKS
As a supplier of products used in medical treatments, the Company faces an
inherent business risk of exposure to product liability claims in the event the
end use of its products results in unanticipated adverse effects on patients,
including serious personal injury or death. Certain of the Company's new
products, such as its Glaucoma Wick and its ICL, are based upon unique designs
and materials. Product liability risk is higher with respect to these products,
as they have a limited history of testing, use and performance, and unknown
defects associated with such products may only be identified through the passage
of time. Potential negative publicity concerning the defective product could
also affect the Company's other products. No assurance can be given that the
Company will not experience product liability claims in the future with respect
to its established or new products. Any product liability claim could have a
material adverse effect on the Company.
Any product liability claims will be subject to the uncertainties attendant to
litigation. The Company currently maintains product liability insurance
coverage. No assurance can be given that such insurance coverage is in an
amount sufficient to cover all possible liabilities, or one or more large
claims, or that the insurer will be solvent at the time of any covered loss.
Also, no assurance can be given that adequate product liability insurance will
continue to be available in the future or maintained at a reasonable cost to the
Company. In the event of a successful product liability suit against the
Company, lack or insufficiency of insurance coverage could have a material
adverse effect on the Company.
The Company may, in the event there are material deficiencies or defects in the
design or manufacture of any of its products, be required to recall such
defective products. In the event of a product recall, the cost to, and the
potential liability of, the Company could be significant and could have a
material adverse effect on the Company's business and operations, especially if
such liability relates to the recall of a product generating significant
revenues and earnings for the Company, such as its foldable IOLs. Potential
negative publicity from a recall could also adversely affect sales and/or
regulatory approvals of the Company's other products.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements and the Report of Independent Certified Public Accountants
are filed with this Annual Report on Form 10-K in a separate section following
Part IV, as shown on the index under Item 14(a) of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
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ITEMS 10., 11., 12. AND 13.
Information required by Part III (Items 10, 11, 12 and 13) is incorporated by
reference to the Company's definitive proxy statement for its 1997 Annual
Meeting of Stockholders.
PART IV
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<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON
FORM 8-K
Page
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(a)(1) Financial statements required by Item B of this form
are filed as a separate part of this report following
Part IV
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets at January 3, 1997 and December 29, 1995 F-3
Consolidated Statements of Income for the years ended January 3, 1997,
December 29, 1995 and December 30, 1994 F-4
Consolidated Statements of Stockholders' Equity for the years ended January 3, 1997,
December 29, 1995 and December 30, 1994 F-5
Consolidated Statements of Cash Flows for the years ended January 3, 1997,
December 29, 1995 and December 30, 1994 F-6
Notes to Consolidated Financial Statements F-7 - F-23
</TABLE>
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<TABLE>
<S> <C> <C>
(2) Schedules required by Regulation S-X are filed as an exhibit to this report:
Independent Certified Public Accountants' Report on Schedules and Consent F-24
II. Valuation and Qualifying Accounts and Reserves F-25
Schedules not listed above have been omitted because the information required to be
set forth therein is not applicable or is shown in the financial statements notes thereto
</TABLE>
<TABLE>
<S> <C> <C>
(3) Exhibits
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3.1 Certificate of Incorporation, as amended/(1)/
3.4 By-laws, as amended/(9)/
4.1 1983 Incentive Stock Option Plan/(5)/
4.2 1990 Stock Option Plan/((2)/
4.3 1991 Stock Option Plan/((3)/
4.4 1995 STAAR Surgical Company Consultant Stock Plan/(4)/
4.5 1996 STAAR Surgical Company Non-Qualified Stock Plan/(10)/
4.6 Stockholders' Rights Plan, dated effective April 20, 1995/(8)/
10.1 Non-Exclusive License Agreement, dated March 13, 1986, between the
Company and CooperVision, Inc/(7)/
10.2 Technology License Agreement And Option To Purchase Equity Interest,
dated March 13, 1986, between the Company and CooperVision, Inc/(7)/
10.3 License Agreement, dated December 16, 1986, between the Company and
Optical Radiation Corporation/(5)/
10.4 Joint Venture Agreement, dated May 23, 1988, between the Company,
Canon Sales Co, Inc. and Canon, Inc/(6)/
10.5 License Agreement, dated March 9, 1990, between Chiron Ophthalmics,
Inc. and the Company/(7)/
10.6 License Agreement, dated March 9, 1990, between Chiron Ophthalmics,
Inc. and the Company/(7)/
10.7 Form of Formula Stock Option Agreements granted to certain executive
officers and directors of Company commencing in August 1990 in
connection with 1990 Stock Option Plan/(5)/
</TABLE>
28
<PAGE>
<TABLE>
<S> <C> <C>
10.8 Promissory Note, dated February 28, 1991, from John R. Wolf to
the Company/(11)/
10.9 Stock Pledge/Security Agreement, dated February 28, 1991, between John
R. Wolf, the Company and Pollet & Associates/((11)/
10.10 Promissory Note, dated February 28, 1991, from William C. Huddleston to
the Company/((11)/
10.11 Stock Pledge/Security Agreement, dated February 28, 1991, between
William C. Huddleston, the Company and Pollet & Associates/(11)/
10.12 Amended and Restated Soft IOL License Agreement, restated as of January
31, 1992, between the Company, Softlensco, Inc., and Iolab
Corporation/(11)/
10.13 Promissory Note, dated May 26, 1992, from Andrew F. Pollet./(5)/
10.14 Deed of Trust, dated September 21, 1992, by the Andrew F. Pollet and
Sally M. Pollet Revocable Trust dated March 6, 1990/(5)/
10.15 Promissory Note, dated July 3, 1992, from William C. Huddleston to the
Company/(5)/
10.16 Stock Pledge/Security Agreement, dated July 3, 1992, between William C.
Huddleston the Company and Pollet & Associates/(5)/
10.17 Lease, dated November 9, 1992, by and between Linda Lee Brown and
Phyllis Ann Bailey and the Company regarding real property located at
1911 Walker Avenue, Monrovia, California/(5)/
10.18 Lease Addition, dated November 9, 1992, by and between Turner Trust,
Dale E. Turner & Francis R. Turner, as Trustees and the Company to that
certain lease dated October 20, 1983 regarding real property located at
1911 Walker Avenue, Monrovia, California/(5)/
10.19 Patent License Agreement, dated May 24, 1995, with Eye Microsurgery
Intersectoral Research and Technology Complex/(9)/
10.20 Patent License Agreement, dated January 1, 1996, with Eye Microsurgery
Intersectoral Research and Technology Complex/(10)/
10.21 Promissory Note, dated March 18, 1993, from William C. Huddleston to the
Company/(7)/
10.22 Indenture of Lease, dated September 1, 1993, with FKT Associates regarding
real property located at 1900 South Myrtle Avenue, Monrovia, California/(7)/
</TABLE>
29
<PAGE>
<TABLE>
<S> <C> <C>
10.23 Business Loan Agreement, dated February 15, 1996, between STAAR
Surgical Company and First Interstate Bank of California/(10)/
10.24 Commercial Security Agreement, dated February 15, 1996, between
STAAR Surgical Company/(10)/
10.25 Revolving Line of Credit Note dated December 2, 1996,
between STAAR Surgical Company and First Interstate Bank of
California/(10)/
10.26 Modification To Employment Agreement, dated December 20, 1994,
between the Company and John R. Wolf/(7)/
10.27 First Amendment To Sales Representative Agreement, dated December 20,
1994, between the Company and John R. Wolf/(7)/
10.28 Employment Agreement, dated March 1, 1994, between the Company and
Vladimir Feingold/(7)/
10.29 Modification To Employment Agreement, dated May 6, 1996, between the
Company and Vladimir Feingold/(10)/
10.30 Employment Agreement, dated March 1, 1994, between the Company and
William C. Huddleston/(7)/
10.31 Modification To Employment Agreement, dated May 6, 1996, between the
Company and William C. Huddleston/(10)/
10.32 Employment Agreement, dated March 1, 1994, between the Company and
Carl M. Manisco/(7)/
10.33 Modification To Employment Agreement, dated May 6, 1996, between the
Company and Carl M. Manisco/(10)/
10.34 Employment Agreement, dated March 1, 1994, between the Company and
Michael J. Lloyd/(7)/
10.35 Modification To Employment Agreement, dated May 6, 1996, between the
Company and Michael J. Lloyd/(10)/
10.36 Employment Agreement, dated March 1, 1994, between the Company and
Stephen L. Ziemba/(7)/
10.37 Modification To Employment Agreement, dated May 6, 1996, between the
Company and Stephen L. Ziemba/(10)/
10.38 Employment Contract, dated May 26, 1996, between the Company and
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
Donald Ferguson/(10)/
10.39 Amended IOL Supply Agreement, dated June 10, 1994, between the
Company and Chiron Vision Corporation/(7)/
10.40 Manufacturing Site Agreement, dated June 10, 1994, between the
Company and Chiron Vision Corporation/(7)/
10.41 Form of Non-Qualified Stock Option Agreements granted to Directors of
Company in June and August 1994/(7)/
10.42 Agreement For Purchase And Sale Of Assets, dated October 1, 1994,
between STAAR Surgical Australasia Pty. Ltd. and Bionica Pty. Ltd./(7)/
10.43 Agreement, dated October 10, 1995, with China Eye Joint Venture/(9)/
10.44 Agreement, dated November 1994, between the Company and Norbrook
Laboratories Limited/(7)/
21 List of Significant Subsidiaries/(10)/
24 Powers of Attorney
27 Financial Data Schedules
- ------------
</TABLE>
<TABLE>
<CAPTION>
(Footnotes to Exhibits):
<S> <C>
(1) Incorporated by reference from the Company's Registration Statement on Form S-18, File No.
2-83434, as filed on April 29, 1983
(2) Incorporated by reference from the Company's Registration Statement on Form S-8, File No.
33-37248, as filed on October 11, 1990
(3) Incorporated by reference from the Company's Registration Statement on Form S-8, File No.
33-76404, as filed on March 11, 1994
(4) Incorporated by reference from the Company's Registration Statement on Form S-8, File No.
33-60241, as filed on June 15, 1995
(5) Incorporated by reference from the Company's Annual Report on Form 10-K for the year end
January 1, 1993, as filed on April 1, 1993
(6) Incorporated by reference from the Company's Annual Report on Form 10-K for the year end
December 31, 1993, as filed on March 31, 1994
(7) Incorporated by reference from the Company's Annual Report on Form 10-K for the year end
December 30, 1994, as filed on March 30, 1995
(8) Incorporated by reference from the Company's Proxy Statement for its Annual Meeting of
</TABLE>
31
<PAGE>
<TABLE>
<S> <C>
Stockholders held on June 6, 1995, as filed on May 12, 1995
(9) Incorporated by reference from the Company's Annual Report on Form 10-K for the year end
December 29, 1995, as filed on March 28, 1996
(10) Filed herewith
(11) Refiled herewith pursuant to Reg. (S)201.24
</TABLE>
32
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized on April 2, 1997.
STAAR SURGICAL COMPANY
By: /s/ John R. Wolf
-----------------------------
John R. Wolf, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant on
April 2, 1997 and in the capacities indicated.
/s/ John R. Wolf President, Chief Executive Officer and Chairman
- ----------------------------
John R. Wolf
/s/ William C. Huddleston Vice President and Chief Financial Officer
- ---------------------------- (principal accounting and financial officer)
William C. Huddleston
/s/ Peter J. Utrata, M.D.* Director
- ----------------------------
Peter J. Utrata, M.D.
/s/ Donald R. Sanders, M.D.* Director
- ----------------------------
Donald R. Sanders
/s/ Andrew F. Pollet* Director
- ----------------------------
Andrew F. Pollet
/s/ Michael R. Deitz, M.D.* Director
- -----------------------------
Michael R. Deitz, M.D.
* /s/ William C. Huddleston
- -----------------------------
William C. Huddleston
(Attorney in Fact)
33
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------
YEARS ENDED JANUARY 3, 1997,
DECEMBER 29, 1995 AND DECEMBER 30, 1994
---------------------------------------
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
STAAR Surgical Company
We have audited the accompanying consolidated balance sheets of STAAR Surgical
Company and subsidiaries as of January 3, 1997 and December 29, 1995, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended January 3, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide 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 STAAR
Surgical Company and subsidiaries as of January 3, 1997 and December 29, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended January 3, 1997, in conformity with generally accepted
accounting principles.
BDO SEIDMAN, LLP
Los Angeles, California
March 11, 1997
F-2
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1997 AND DECEMBER 29, 1995
=====================================
<TABLE>
<CAPTION>
ASSETS (Note 5) 1996 1995
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,469,515 $ 3,767,011
Accounts receivable, less allowance for doubtful accounts
of $111,525 and $119,490 (Note 1) 6,827,250 7,492,439
Inventories (Note 2) 12,365,867 9,591,898
Prepaid, deposits and other current assets 1,676,611 917,895
Deferred income tax (Note 7) 1,331,075 3,323,724
----------- -----------
Total current assets 28,670,318 25,092,967
----------- -----------
Investment in joint venture (Note 4) 2,464,140 2,121,492
Property, plant and equipment, net (Note 3) 8,920,989 6,362,696
Patents and licenses, net of accumulated amortization of
$1,401,392 and $826,715 (Notes 8 and 9) 8,900,236 3,538,769
Other assets 2,163,336 1,687,066
----------- -----------
$51,119,019 $38,802,990
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable (Note 5) $ 7,489,549 $ 3,548,686
Accounts payable 1,732,064 1,448,135
Current portion of long-term debt (Note 6) 703,260 480,151
Other current liabilities (Notes 11 and 12) 3,259,714 3,281,321
----------- -----------
Total current liabilities 13,184,587 8,758,293
----------- -----------
Long-term debt (Note 6) 844,050 1,212,178
Deferred gain on sale of license (Note 4) - 143,750
Other long-term liabilities 486,205 10,743
----------- -----------
Total liabilities 14,514,842 10,124,964
----------- -----------
Commitments and contingencies (Notes 10, 11 and 13)
Stockholders' equity (Notes 10, 11 and 13):
Common stock, $.01 par value, 30,000,000 shares authorized;
issued and outstanding 13,070,705 and 12,784,148 130,707 127,841
Capital in excess of par value 41,518,049 40,325,287
Accumulated translation adjustment (160,573) -
Accumulated deficit (2,557,991) (9,449,087)
----------- -----------
38,930,192 31,004,041
Notes receivable (Note 10) (2,326,015) (2,326,015)
----------- -----------
Total stockholders' equity 36,604,177 28,678,026
----------- -----------
$51,119,019 $38,802,990
=========== ===========
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-3
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995 AND DECEMBER 30, 1994
================================================================================
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Sales $41,212,511 $34,180,420 $26,333,328
Royalty income (Note 9) 1,000,000 514,000 1,020,046
----------- ----------- -----------
Total revenues 42,212,511 34,694,420 27,353,374
Cost of sales 10,195,396 8,441,099 6,058,717
----------- ----------- -----------
Gross profit 32,017,115 26,253,321 21,294,657
----------- ----------- -----------
Selling, general and administrative expenses:
General and administrative (Note 13) 5,627,576 5,000,484 4,364,722
Marketing and selling 12,227,593 10,911,240 8,694,134
Research and development 4,084,991 3,253,536 2,718,451
----------- ----------- -----------
Total selling, general and
administrative expenses 21,940,160 19,165,260 15,777,307
----------- ----------- -----------
Operating income 10,076,955 7,088,061 5,517,350
----------- ----------- -----------
Other income (expense):
Equity in earnings of joint venture (Note 4) 486,398 517,507 867,389
Interest expense - net (450,276) (265,645) (168,413)
Other income (expense) 116,563 51,145 (74,012)
----------- ----------- -----------
Total other income 152,685 303,007 624,964
----------- ----------- -----------
Income before income taxes 10,229,640 7,391,068 6,142,314
Income tax provision (benefit) (Note 7) 3,338,544 (90,652) (2,184,000)
----------- ----------- -----------
Net income $ 6,891,096 $ 7,481,720 $ 8,326,314
=========== =========== ===========
Net income per share (Note 10):
Primary $ 0.50 $ 0.55 $ 0.63
=========== =========== ===========
Fully diluted $ 0.50 $ 0.55 $ 0.62
=========== =========== ===========
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-4
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995 AND DECEMBER 30, 1994
<TABLE>
<CAPTION>
====================================================================================================================================
Capital in Accumulated Notes
Common Excess of Accumulated Translation and Other
Stock Par Value Deficit Adjustment Receivables Total
--------- ------------ ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, at December 31, 1993 $125,632 $41,294,627 $(25,257,121) $ - $(4,177,365) $11,985,773
Common stock issued in private placement
(Note 10) 31 9,963 - - - 9,994
Common stock issued upon exercise of
options (Note 10) 1,865 692,574 - - (192,000) 502,439
Common stock issued upon exercise of
warrants (Note 10) 1,657 329,219 - - - 330,876
Common stock issued as payment for services
(Note 10) 759 369,741 - - - 370,500
Common stock returned in exchange for notes
receivable (Notes 10 and 13) (3,599) (1,936,688) - - 1,940,287 -
Common stock issued to purchase assets
(Notes 10 and 13) 700 349,300 - - - 350,000
Stock options issued as payment for
services (Notes 10 and 11) - 50,000 - - - 50,000
Payments on notes receivable (Note 10) - - - - 103,063 103,063
Net income - - 8,326,314 - - 8,326,314
-------- ----------- ------------ ----------- ----------- -----------
Balance, at December 30, 1994 127,045 41,158,736 (16,930,807) - (2,326,015) 22,028,959
Common stock issued upon exercise of
options (Note 10) 872 399,902 - - - 400,774
Common stock issued upon exercise of
warrants (Note 10) 277 32,987 - - - 33,264
Common stock issued as payment for services
(Note 10) 511 432,302 - - - 432,813
Common stock repurchased and cancelled (1,750) (1,626,980) - - - (1,628,730)
Cash paid on common stock issued for
cashless exercise of 138,026 options
and warrants 886 (71,660) - - - (70,774)
Net income - - 7,481,720 - - 7,481,720
-------- ----------- ------------ ----------- ----------- -----------
Balance, at December 29, 1995 127,841 40,325,287 (9,449,087) - (2,326,015) 28,678,026
Common stock issued upon exercise of
options (Note 10) 2,266 983,926 - - - 986,192
Common stock issued upon exercise of
warrants (Note 10) 375 64,625 - - - 65,000
Common stock issued as payment for services
(Note 10) 444 458,492 - - - 458,936
Common stock repurchased and cancelled (219) (314,281) - - - (314,500)
Foreign currency translation adjustment - - - (160,573) - (160,573)
Net income - - 6,891,096 - - 6,891,096
-------- ----------- ------------ ----------- ----------- -----------
Balance, at January 3, 1997 $130,707 $41,518,049 $ (2,557,991) $(160,573) $(2,326,015) $36,604,177
======== =========== ============ =========== =========== ===========
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-5
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 3, 1997, DECEMBER 29, 1995 AND DECEMBER 30, 1994
================================================================================
INCREASE IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,891,096 $ 7,481,720 $ 8,326,314
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation of property and equipment 1,720,379 1,159,610 996,068
Amortization of patents and licenses 574,677 299,171 257,075
Provision for allowance for doubtful accounts 111,525 111,512 121,435
Equity in earnings of joint venture (486,398) (517,507) (867,389)
Utilization (recognition) of deferred tax asset 1,992,649 (923,724) (2,400,000)
Common stock issued for services 458,936 432,813 370,500
Options issued for services - - 50,000
Change in operating working capital (Note 14) (2,716,699) (3,030,452) (2,888,728)
------------ ----------- -----------
Net cash provided by operating activities 8,546,165 5,013,143 3,965,275
------------ ----------- -----------
Cash flows from investing activities:
Acquisition of property and equipment (4,278,671) (3,486,744) (2,152,646)
Issuance of notes receivable - - (192,000)
Increase in patents and licenses (5,936,144) (1,980,211) (872,983)
Increase in other assets (476,270) (583,505) (835,169)
------------ ----------- -----------
Net cash used in investing activities (10,691,085) (6,050,460) (4,052,798)
------------ ----------- -----------
Cash flows from financing activities:
Increase in borrowings under notes payable
and long-term debt 2,619,075 794,199 920,001
Payments on other notes payable and long-term debt (536,028) (11,128) -
Net borrowings (payments) under line-of-credit 2,188,259 2,082,836 (168,373)
Proceeds from the issuance of common stock 1,051,191 434,107 1,035,309
Cash paid in lieu of exercise of stock
options and warrants - (70,774) -
Proceeds from collections on notes receivable - - 103,063
Payments for repurchase of common stock (314,500) (1,628,799) -
------------ ----------- -----------
Net cash provided by financing activities 5,007,997 1,600,441 1,890,000
------------ ----------- -----------
Effect of exchange rate changes on cash and cash equivalents (160,573) - -
Increase in cash and cash equivalents 2,702,504 563,124 1,802,477
Cash and cash equivalents at beginning of year 3,767,011 3,203,887 1,401,410
------------ ----------- -----------
Cash and cash equivalents at end of year $ 6,469,515 $ 3,767,011 $ 3,203,887
============ =========== ===========
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
F-6
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
YEARS ENDED JANUARY 3, 1997,
DECEMBER 29, 1995 AND DECEMBER 30, 1994
=======================================
ORGANIZATION AND DESCRIPTION OF BUSINESS
STAAR Surgical Company (the "Company") is a developer, manufacturer and global
distributor of medical devices used in minimally invasive ophthalmic surgery.
The Company was incorporated in California in 1982 as a successor to a
partnership for the purpose of developing, producing, and marketing intraocular
lenses ("IOLs") and other products for minimally invasive ophthalmic surgery.
The Company was reincorporated in Delaware in April 1986.
In 1982 and 1983, the Company's operations consisted mainly of research and
development and preliminary marketing and capital raising activities. In 1982,
the Company commenced the development of foldable IOLs, which are used as
replacements for the natural lens after its removal in cataract surgery, and
began production and sale of foldable IOLs in 1986 for implantation in
connection with clinical studies for such products. In September 1991, the
Company received United States Food and Drug Administration ("FDA") pre-market
approval for the Company's ELASTIC/TM/ and ELASTIMIDE/TM/ foldable IOL models,
which the Company now markets worldwide. The Company's other primary products,
developed more recently, are its "wick" style glaucoma implant (the "Glaucoma
Wick"), an ocular device developed to provide a more effective and longer-term
solution for glaucoma; its implantable refractive contact lens ("ICL"), an
ocular implant designed to correct refractive disorders such as myopia (near-
sightedness) and hyperopia (far-sightedness); and its STAARVISC/TM/ viscoelastic
solution, used during IOL and ICL surgery. The Company markets the Glaucoma
Wick, which the Company introduced in late 1995, and its ICLs and STAARVISC/TM/
viscoelastic solution, which the Company introduced in late 1996, on a limited
basis in selected foreign countries.
The Company's principal operating subsidiary is STAAR Surgical AG, a wholly
owned subsidiary formed in Switzerland to develop, manufacture and distribute
worldwide certain of the Company's products, including its Glaucoma Wick and
ICLs. The Company and STAAR Surgical AG have also formed six other wholly owned
operating subsidiaries for the purpose of distributing and marketing the
Company's products internationally, including STAAR Surgical - Canada, Ltd. and
STAAR Surgical Australasia Pty., Ltd., formed by the Company in 1994, and STAAR
Surgical France - SARL, STAAR Surgical - South Africa Pty., Ltd., STAAR Surgical
Austria, GmbH; and STAAR Surgical Germany, GmbH, which were formed by STAAR
Surgical AG in 1993 through 1995.
BASIS OF PRESENTATION
The accompanying financial statements consolidate the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Assets and liabilities of
foreign subsidiaries are translated at rates of exchange in effect at the close
of the period. Revenues and expenses are translated at the weighted average of
exchange rates in effect during the year. The resulting gains and losses are
deferred and are shown as a separate component of stockholders' equity. During
1995 and 1994, foreign currency translation and transaction gains and losses
were not material. During 1996, the net foreign translation loss was $160,573
and net foreign currency transaction loss was $261,181. Investments in
affiliates and joint ventures are accounted for using the equity method of
accounting.
The Company's fiscal year ends on the Friday nearest December 31.
F-7
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
=======================================
REVENUE RECOGNITION
The Company generally supplies a quantity of foldable IOLs with different
specifications to domestic customers, generally ophthalmologists, surgical
centers, hospitals and other health providers, on a consignment basis, and
recognizes sales when an ophthalmic surgeon implants the consigned foldable IOL.
However, sales to foreign distributors are recognized upon shipment. Revenue
from license and technology agreements is recorded as income when the Company
has satisfied the terms of such agreements and is notified of the amounts.
EXPORT SALES
During the fiscal years ended January 3, 1997, December 29, 1995 and December
30, 1994, the Company had export sales, primarily to Europe, South Africa,
Australia, and Southeast Asia, of approximately $11,620,000, $8,133,000 and
$4,284,000, respectively. Of these sales, approximately $7,576,000, $4,841,000
and $3,361,000 were to Europe, which has been the Company's principal foreign
market for the last three fiscal years.
The Company sells its products internationally, which subject the Company to
several potential risks, including fluctuating exchange rates (to the extent the
Company's transactions are not in U.S. dollars), regulation of fund transfers by
foreign governments, United States and foreign export and import duties and
tariffs and political instability.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an initial
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market (net
realizable value).
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives, which are generally not greater than ten years. Leasehold improvements
are amortized over the life of the lease or estimated useful life, if shorter.
PATENTS AND LICENSES
The Company capitalizes the costs of acquiring patents and licenses as well as
the legal costs of successfully defending its rights to these patents.
Amortization is computed on the straight-line basis over the estimated useful
lives, which range from 8 to 17 years. Capitalized patent costs are reviewed
each year based on management's estimates of sales of the related products.
Patent and license costs are expensed when determined not realizable.
F-8
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
(CONTINUED)
=======================================
PATENTS AND LICENSES (Continued)
The Company's ability to compete effectively is materially dependent upon the
proprietary nature of the designs, processes, technologies and materials owned,
used by or licensed to the Company. The Company has been and will continue to be
involved in litigation to protect its copyrights, patents and proprietary
properties and technology.
START-UP COSTS
Included in other assets at January 3, 1997 and December 29, 1995 are start-up
costs of $1,010,903 and $835,469 respectively. These expenditures are directly
related to and incurred during the start-up phase of the production of two new
products: the ICL and hyaluronic acid. The costs primarily consist of direct
labor and overhead associated with the start-up. The start-up costs are being
amortized on a straight-line basis over a period not to exceed three years.
Recoverability of these costs are assessed on an on-going basis.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, contingent liabilities,
revenues, and expenses at the date and for the periods that the financial
statements are prepared. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, cash equivalents, accounts receivable, accounts
payable, and current notes payable approximate their fair values because of the
short maturity of these instruments. With respect to long-term debt, based on
the borrowing rates currently available to the Company for similar bank and
equipment loans and capitalized leases, the amounts reported approximate the
fair value of the respective financial instruments.
NET INCOME PER SHARE
Primary net income per share has been computed by dividing net income by the
weighted average number of common shares and common stock equivalents (warrants
and options) outstanding during each year. For each year noted below, the
weighted average number of shares is computed using the treasury stock method,
under which the number of common stock equivalent shares outstanding reflects an
assumed use of the proceeds from the issuance of such shares and from the
assumed exercise of such common stock options and warrants to repurchase shares
of the Company's common stock at the current fair market values.
F-9
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
SUMMARY OF ACCOUNTING POLICIES
(CONCLUDED)
=======================================
NET INCOME PER SHARE (Continued)
Common stock equivalents arising from the assumed exercise of warrants and
options were converted using the year-end market price of the Company's common
stock. The number of common and common equivalent shares used for computing
primary and fully diluted net income per share were as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Primary 13,867,108 13,678,882 13,170,027
Fully diluted 13,867,108 13,715,097 13,500,363
</TABLE>
STOCK-BASED COMPENSATION
As of January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), which
establishes a fair value method of accounting for stock-based compensation
plans. In accordance with SFAS 123, the Company has chosen to continue to
account for stock-based compensation utilizing the intrinsic value method
prescribed in APB 25. Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market price of the Company's stock
at the date of grant over the amount an employee must pay to acquire the stock.
Also, in accordance with SFAS 123, the Company has provided footnote disclosure
with respect to stock-based employee compensation. The cost of stock-based
employee compensation is measured at the grant date based on the value of the
award and recognizes this cost over the service period. The value of the stock-
based award is determined using a pricing model whereby compensation cost is the
excess of the fair value of the stock as determined by the model at grant date
or other measurement date over the amount an employee must pay to acquire the
stock.
F-10
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JANUARY 3, 1997,
DECEMBER 29, 1995 AND DECEMBER 30, 1994
=======================================
NOTE 1 - ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Domestic $ 4,718,142 $ 4,486,125
Export 2,220,633 2,611,804
Royalties - 514,000
----------- -----------
6,938,775 7,611,929
Less allowance for doubtful accounts 111,525 119,490
----------- -----------
$ 6,827,250 $ 7,492,439
=========== ===========
</TABLE>
NOTE 2 - INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Raw materials and purchased parts $ 1,518,819 $ 1,104,203
Work in process 1,644,234 1,143,119
Finished goods 9,202,814 7,344,576
----------- -----------
$12,365,867 $ 9,591,898
=========== ===========
</TABLE>
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Machinery and equipment $10,186,227 $ 7,693,617
Furniture and fixtures 4,460,082 3,073,911
Leasehold improvements 2,550,049 2,150,158
----------- -----------
17,196,358 12,917,686
Less accumulated depreciation and
amortization 8,275,369 6,554,990
----------- -----------
$ 8,920,989 $ 6,362,696
=========== ===========
</TABLE>
F-11
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 4 - INVESTMENT IN JOINT VENTURE
The Company owns a 50% equity interest in a joint venture, the CANON-STAAR
Company, Inc. ("CSC"), with Canon Inc. ("Canon") and Canon Sales Co, Inc.
("Canon Sales"). The joint venture was formed to manufacture and sell the
Company's IOL products to Canon Sales or other distributors in Japan. The
Company sold CSC an exclusive license to manufacture and market its products in
Japan. The Company recorded $1,500,000 of deferred revenue on the sale of the
license, which was recognized over eight years through October 1996 on a
straight-line basis. The Company uses the equity method of accounting for this
investment. The financial statements of CSC include assets of approximately
$6,640,000 and $5,454,000, and liabilities of approximately $1,381,000 and
$654,000, as of January 3, 1997 and December 29, 1995, respectively.
The Company's equity in earnings of the joint venture is calculated as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----------
<S> <C> <C> <C>
Joint venture net income $685,296 $660,014 $1,359,778
Equity interest 50% 50% 50%
-------- -------- ----------
Equity in net income 342,648 330,007 679,889
Recognition of deferred gain
on sale of license 143,750 187,500 187,500
-------- -------- ----------
Equity in earnings of joint venture $486,398 $517,507 $ 867,389
======== ======== ==========
</TABLE>
The Company recorded sales of certain IOL products to CSC of approximately
$845,000, $171,000 and $262,000 in 1996, 1995 and 1994, respectively.
NOTE 5 - NOTES PAYABLE
In December 1993, the Company entered into a three year revolving credit
facility which provided for borrowings up to $3,000,000, limited to 75% of
eligible accounts receivable, at the prime interest rate (8.5% at December 29,
1995 and December 30, 1994) plus 2.75% at December 29, 1995 and 3.5% at December
30, 1994. The weighted average interest rate was 11.63% and 10.32% for fiscal
1995 and 1994. The loan was secured by substantially all of the assets of the
Company and contained certain restrictive covenants including the maintenance of
various financial ratios and a limitation of indebtedness to others and payment
of dividends. The maximum borrowings outstanding under this facility during 1995
was approximately $2,800,000. Borrowings outstanding at December 29, 1995 was
$2,512,000. During 1996, this credit facility was refinanced with another
lender.
In February 1996, the Company refinanced and increased its domestic line of
credit, which now allows the Company to borrow up to $5 million on a revolving
basis, at a rate of interest not to exceed the prime interest rate. The loan
agreement requires the Company to satisfy certain financial tests and limits the
amount of indebtedness the Company may have to others and the payment of
dividends. The line of credit expires in June 1997. Borrowings are
collateralized by substantially all of the assets of the Company. Borrowings
outstanding as of January 3, 1997 were approximately $4,700,000. The Company was
in compliance with the restrictive covenants as of January 3, 1997.
F-12
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 5 - NOTES PAYABLE (Continued)
In May 1994, the Company entered into a separate revolving credit facility with
a Swiss bank which provides for borrowings up to $827,815 (1,125,000 Swiss
Francs at the exchange rate at January 3, 1997) at the interest rate of 5.5%. A
commission rate of 0.25% is payable each quarter. The loan does not have a
termination date and is secured by a general assignment of claims. Borrowings
outstanding under this facility as of January 3, 1997 and December 29, 1995 were
$789,549 (1,072,997 Swiss Francs) and $1,036,945 (1,203,893 Swiss Francs),
respectively.
In 1996, the Company issued a note in the amount of $2,000,000 as partial
consideration for the acquisition of a license. The note is due in equal
quarterly installments through 1997.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Note payable to bank, interest at 6.25%,
payable in four equal annual installments plus
interest beginning in December 1996, guaranteed
by the Swiss federal government and the Canton of Bern $ 618,584 $ 991,703
Note payable to equipment vendor, interest
at 13%, payable in monthly installments
plus interest through December 1999,
secured by equipment 101,118 124,379
Obligations under capitalized leases
(see Note 11) 827,608 576,247
---------- ----------
1,547,310 1,692,329
Less current portion 703,260 480,151
---------- ----------
Long-term debt due after one year $ 844,050 $1,212,178
========== ==========
</TABLE>
NOTE 7 - INCOME TAXES
Effective January 2, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" (the "Statement") which
requires, among other things, a change from the deferred method to the asset and
liability method of accounting for income taxes. As a result of the adoption of
the Statement, the tax benefits of net operating loss carryforwards utilized in
1995 and 1994 are presented in the Consolidated Statement of Income as
reductions of the provisions for income tax.
F-13
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 7 - INCOME TAXES (Continued)
The provision (benefit) for income taxes consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ------------
<S> <C> <C> <C>
Domestic - current:
Federal (net of $2,006,000, $2,513,000 and
$1,608,000 tax benefit from operating
loss carryforwards) $ 492,000 $ 149,000 $ 138,000
State (net of $-0-, $-0- and $441,000
tax benefit from operating loss
carryforwards) 725,000 684,000 78,000
---------- --------- -----------
1,217,000 833,000 216,000
Foreign taxes 129,000 - -
Change in deferred tax assets, net 1,993,000 (924,000) (2,400,000)
---------- --------- -----------
$3,339,000 $ (91,000) $(2,184,000)
========== ========= ===========
</TABLE>
At January 3, 1997, the Company had net operating loss carryforwards of
approximately $2.5 million for federal income tax purposes expiring at various
dates between 1999 and 2006. The Company utilized all of its remaining tax loss
carryforwards for state income tax purposes during 1995.
Alternative minimum tax and research and experimentation tax credit
carryforwards at January 3, 1997 were approximately $424,000 and $481,000,
respectively, for tax purposes. The tax credits expire at various dates through
2004.
The provision (benefit) based on income before taxes differs from the amount
obtained by applying the statutory federal income tax rate to income before
taxes as follows:
<TABLE>
<CAPTION>
Liability Method
-------------------------
1996 1995 1994
------ ------ -------
<S> <C> <C> <C>
Computed provision for taxes based on income
at statutory rate 34.0% 34.0% 34.0%
Permanent differences 1.5 0.2 (2.2)
State taxes, net of federal income tax benefit 6.1 7.7 5.7
Tax benefit of net operating loss carryforward - (28.2) (37.5)
Tax effect attributed to foreign operations (10.1) - -
Reduction of valuation allowance - (18.5) (39.1)
Other 1.1 3.8 3.5
----- ----- ------
Effective tax provision (benefit) rate 32.6% (1.0)% (35.6)%
===== ===== ======
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries amounted to
approximately $3.2 million at January 3, 1997. Those earnings are considered to
be indefinitely reinvested and, accordingly, no provision for United States
federal and state income taxes has been provided thereon. Upon distribution of
those earnings in the form of dividends or otherwise, the Company would be
subject to both United States income taxes (subject to an adjustment for foreign
tax credits) and withholding taxes payable to the various foreign countries.
Determination of the amount of unrecognized deferred United States income tax
liability is not practicable because of the complexities associated with its
hypothetical calculation.
F-14
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 7 - INCOME TAXES (Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of January 3, 1997 and
December 29, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 57,000 $ 44,000
Inventory reserves and uniform capitalization 307,000 262,000
Accrued vacation 114,000 117,600
Amortization of deferred gain - 57,600
Depreciation and amortization (937,000) (670,000)
State taxes 153,000 153,000
Net operating loss carryforwards 732,075 2,578,524
Tax credits 905,000 781,000
---------- ----------
Total deferred tax assets $1,331,075 $3,323,724
========== ==========
</TABLE>
As a result of the Company's positive operating results for each of the three
years ended January 3, 1997, the Company determined that deferred tax assets of
$1,331,075 and $3,323,724 should be recognized as of January 3, 1997 and
December 29, 1995. This amount was based on a consideration of current and
future anticipated earnings. Future income levels should result in full
recognition of the deferred tax asset. The amount recorded as of January 3, 1997
includes the capitalization of the remaining balance of the Company's net
operating loss carryforwards. Management believes it is more likely than not
that the deferred tax assets will be realized in full.
NOTE 8 - PATENTS
During 1995, the Company acquired from the Intersectoral Research and Technology
Complex Eye Microsurgery ("IRTC"), a Russian Federation located in Moscow,
Russia, exclusive patent rights to use and sell glaucoma devices in the United
States and certain foreign countries. During 1996, the Company acquired from
IRTC exclusive rights to several domestic and foreign patents associated with
the Company's implantable contact lenses (ICLs). The transactions involve a
specified amount for the patent rights and payments of royalties over the life
of the patents.
In 1996, the Company acquired a license, as part of the settlement of litigation
with Allergan Medical Optics, under U.S. Patent No. 4,681,102, relating to an
apparatus for insertion of an intraocular lens. The acquisition cost has been
included in patents in the accompanying balance sheet.
NOTE 9 - LICENSING AGREEMENTS
The Company has issued Allergan Medical Optics ("AMO"), Alcon Surgical, Inc.
(Alcon), Chiron Vision Corporation (Chiron), IOLAB Corporation (now owned by
Chiron) and Optical Radiation Corporation with licenses to utilize certain of
its patents involving foldable technology in the United States and selected
foreign countries. Each license has a certain amount of prepaid royalties (which
were received by the Company when the license was issued) which will be utilized
by that licensee as sales of the licensed products are made. The Company
recorded $1,000,000, $514,000 and $1,020,046 of royalty income in 1996, 1995 and
1994, respectively, from these licenses.
F-15
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 9 - LICENSING AGREEMENTS (Continued)
The Company was involved with certain litigation with Alcon concerning the
ownership and validity of the underlying patent and license agreement. During
1996, the Company reached a settlement with Alcon.
The Company is involved with certain litigation with Chiron concerning the
ownership and validity of the underlying patent and license agreement. The
Company believes it will prevail in the litigation, however, the outcome is
uncertain and the effects of an adverse outcome, if any, is unknown.
NOTE 10 - STOCKHOLDERS' EQUITY
COMMON STOCK
In 1994, the Company issued 75,914 shares to consultants for services rendered
to the Company. In September 1994, the Company issued 70,000 unregistered shares
of its common stock to its subsidiary, STAAR Surgical Australasia Pty. Ltd., to
purchase the assets of Bionica Inc., the Company's distributor in Australia.
Also, in April 1994, 359,906 shares of the Company's common stock were returned
to the Company by a former officer in exchange for his promissory notes to the
Company totaling $1,940,287, which notes the officer in prior years had issued
to the Company as consideration for the purchase of common stock. The shares
were canceled by the Company.
In 1995, the Company issued 51,111 shares to consultants for services rendered
to the Company. Also during 1995, the Company repurchased and cancelled 175,000
shares and paid cash in lieu of exercise for 49,363 options and warrants which
were then cancelled. Total consideration paid for the repurchased shares,
options and warrants was $1,699,573.
In 1996, the Company issued 44,384 shares to consultants for services rendered
to the Company. Also during 1996, the Company repurchased and cancelled 21,879
shares. Total consideration paid for the repurchased shares was $314,500.
NOTES RECEIVABLE
As of January 3, 1997 and December 29, 1995, notes receivable from four officers
and a director totalling $2,326,015 were outstanding. The notes were issued in
connection with purchases of the Company's common stock. The notes bear interest
at rates ranging between 6% and 8%, or at the lowest federal applicable rate
allowed by the Internal Revenue Service. The notes are secured by stock pledge
agreements and mature on various dates through May 1998.
F-16
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 10 - STOCKHOLDERS' EQUITY (Continued)
OPTIONS
The table below summarizes the transactions in the Company's several stock
option plans:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price
---------- --------
<S> <C> <C>
Balance at December 31, 1993 970,637 $ 4.74
Options granted 636,500 $ 4.73
Options exercised (186,550) $ 3.74
Options forfeited (101,833) $ 5.23
--------- ------
Balance at December 30, 1994 1,318,754 $ 4.84
Options granted 35,000 $ 4.67
Options exercised (116,192) $ 4.08
Options forfeited (9,808) $ 9.22
--------- ------
Balance at December 29, 1995 1,227,754 $ 4.87
Options granted 574,000 $12.50
Options exercised (226,552) $ 4.26
--------- ------
Balance at January 3, 1997 1,575,202 $ 7.72
========= ======
Options exercisable (vested) at
January 3, 1997 851,868 $ 5.05
========= ======
</TABLE>
Included in the table above are outstanding options to purchase 717,701 shares
of common stock at January 3, 1997, with exercise prices ranging from $2.50 to
$9.25 per share, which options were granted pursuant to the Company's 1990 and
1991 Stock Option Plans. Generally, options under this plan are granted at fair
market value at the date of the grant, become exercisable over a 3-year period,
or as determined by the Board of Directors, and expire over periods not
exceeding 10 years from date of grant.
In 1996, the Board of Directors of the Company approved the 1996 Non-Qualified
Stock Plan, authorizing the granting of options to purchase or awards of the
Company's common stock. Under provisions of the Non-Qualified Stock Plan
600,000 shares were reserved for issuance. Generally, options under the plan
are granted at fair market value at the date of the grant, become exercisable
over a 3 year period, or as determined by the Board of Directors, and expire
over periods not exceeding 10 years from date of grant. Pursuant to this plan
options for 570,000 shares were outstanding at January 3, 1997 with an
exercise price of $12.50 per share.
F-17
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 10 - STOCKHOLDERS' EQUITY (Continued)
In 1994, the Company granted options to officers, directors and consultants to
purchase 636,500 shares of the Company's common stock, at prices ranging from
$4.00 to $5.00. Out of the above, 238,000 options were issued under the 1991
stock option plan and 398,500 options were issued as non-qualified stock
options.
In 1994, officers, employees and others exercised options to purchase 131,000
shares of common stock granted under the 1990, 1991, and non-qualified stock
option plans, at prices from $2.50 to $5.875, resulting in cash proceeds of
$505,064 and a promissory note of $192,000. The promissory note from an officer
is included as a reduction to stockholders' equity as of January 3, 1997. The
note bears interest at 8%, is payable in monthly installments, and is secured by
a Stock Pledge Security Agreement. Principal and any unpaid interest are due on
April 1, 1997.
In 1995, officers, employees and others exercised options to purchase 91,192
shares of common stock granted under the 1990 and 1991 stock option plans, at
prices from $2.50 to $6.00, in exchange for cash of $354,776. Also in 1995, the
Company's former President exercised options to purchase 25,000 shares of common
stock, at a price of $4.75, resulting in cash proceeds of $118,750.
In 1996, the Company granted options to officers, directors and consultants to
purchase 574,000 shares of the Company's common stock at a price of $12.50, the
quoted market value at date of grant. Out of the above, 4,000 options were
issued under the 1991 stock option plan and 570,000 options were issued as non-
qualified stock options.
In 1996, officers, employees, and others exercised 226,552 options from the
1990, 1991 and non-qualified stock option plans at prices from $2.50 to $5.875
resulting in cash and stock proceeds totaling $966,191.
FASB Statement 123, Accounting for Stock-Based Compensation, requires the
Company to provide pro forma information regarding net income and earnings per
share as if compensation cost for the Company's stock option plans had been
determined in accordance with the fair value based method prescribed in FASB
Statement 123. The Company estimates the fair value of each stock option at the
grant date by using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 1996: dividend yield of 0
percent; expected volatility of 11 percent; risk-free interest rate of 6.73
percent; and expected lives of 7 years. Compensation cost computed pursuant to
FASB Statement 123 for options granted in 1995 was not material.
Under the accounting provisions of FASB Statement 123, the Company's net income
and earnings per share for 1996 would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Net income
As reported $6,891,000
Pro forma $6,705,000
Primary and fully diluted earnings per share
As reported $ .50
Pro forma $ .48
</TABLE>
F-18
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 10 - STOCKHOLDERS' EQUITY (Continued)
Due to the fact that the Company's stock option programs vest over many years
and additional awards may be made each year, the above proforma numbers are not
indicative of the financial impact had the disclosure provisions of FASB 123
been applicable to all years of previous option grants. The above numbers do
not include the effect of options granted prior to 1995 that vested in 1995 and
1996.
The following table summarizes information about stock options outstanding at
January 3, 1997.
<TABLE>
<CAPTION>
Options
Outstanding Options Exercisable
Weighted- -------------------
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices at 1/3/97 Life Price at 1/3/97 Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.50 to 4.50 191,819 4.9 years $ 2.92 191,819 $2.92
$4.75 to 7.00 753,383 6.7 years $ 5.20 600,049 $5.31
$9.25 to 12.50 630,000 9.3 years $12.19 60,000 $9.25
- -------------- --------- --------- ------ ------- -----
$2.50 to 12.50 1,575,202 7.5 years $ 7.72 851,868 $5.05
- -------------- --------- --------- ------ ------- -----
</TABLE>
WARRANTS
The table below summarizes the transactions related to the Company's warrants to
purchase common stock:
<TABLE>
<CAPTION>
Weighted-
Average
Number Exercise
of Shares Price
--------- --------
<S> <C> <C>
Balance at December 31, 1993 1,215,525 $4.86
Warrants exercised (165,667) $2.00
Warrants expired (578,884) $7.97
--------- -----
Balance at December 30, 1994 470,974 $2.05
Warrants exercised (136,747) $2.17
Warrants expired (49,833) $2.63
--------- -----
Balance at December 29, 1995 284,394 $1.89
Warrants exercised (37,500) $1.73
--------- -----
Balance at January 3, 1997 246,894 $1.91
========= =====
</TABLE>
All warrants are exercisable as of January 3, 1997.
F-19
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 10 - STOCKHOLDERS' EQUITY (Continued)
WARRANTS (Continued)
In 1994, warrants to purchases 165,667 shares of common stock were exercised at
prices ranging from $1.20 to $4.62 per share, resulting in proceeds of $330,876.
Also in 1994, warrants to purchase 578,884 shares of common stock expired
unexercised. The majority of these warrants were issued in conjunction with
past private placements.
In 1995, warrants to purchase 136,747 shares of common stock were exercised at
prices ranging from $0.60 to $4.24 per share resulting in cash and/or stock (at
market price effective on the date of exercise) proceeds in the amount of
$296,852. The stock paid to exercise the options was cancelled and shown as a
reduction in common stock and additional paid in capital on the balance sheet.
In 1996, warrants to purchase 37,500 shares of common stock were exercised at
prices ranging from $1.20 to $2.00 per share, resulting in proceeds of $65,000.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
LEASE OBLIGATIONS
The Company leases certain property, plant and equipment under capital and
operating lease agreements. In the later part of 1995, the Company entered into
a capital lease agreement to finance surgical equipment that will be sent to
China in consideration of a five year exclusive supply agreement with a hospital
in Hangzhou, China. The Company committed a $600,000 letter of credit as
further collateral for the lease.
Annual future minimum lease payments under noncancellable capital and operating
lease commitments as of January 3, 1997 are as follows:
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Leases Leases
----------- ------- ---------
<S> <C> <C>
1997 $509,840 $ 637,470
1998 387,884 500,702
1999 - 469,789
2000 - 469,789
2001 - 341,256
Thereafter - 284,381
------- ----------
Total minimum lease payments 897,724 2,703,387
==========
Imputed interest 70,116
--------
Present value of net minimum lease payments $827,608
========
</TABLE>
Rent expense was approximately $700,000, $606,000 and $406,000 for the years
ended January 3, 1997, December 29, 1995 and December 30, 1994, respectively.
F-20
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
LITIGATION AND CLAIMS
In addition to litigation discussed in Note 9, the Company is involved in the
following proceedings:
In February 1990, a plaintiff filed a $10,000,000 product liability claim
against a doctor and the Company arising from injuries purportedly suffered by
the plaintiff as a result of the implant of a purportedly defective lens
manufactured by Lynell, a subsidiary of the Company. The Company believes that
any liability was discharged as part of Lynell's reorganization under the
Federal Bankruptcy Code prior to the Company's acquisition of Lynell. In
addition, Lynell is being defended by its liability carrier. These proceedings
are presently administratively off the calendar as of August 1994. If the
lawsuit is reactivated, the Company believes that any liability that may result
will not be material to the consolidated financial position or results of
operations.
The Company is involved in other legal actions and claims arising in the
ordinary course of business. It is the opinion of management (based on advice
of legal counsel) that such litigation will be resolved without material effect
on the Company's financial position.
OTHER COMMITMENTS
During 1993, the Company entered into consulting agreements with certain
individuals to assist the Company in the development of new products and the
promotion of its current products. Such agreements provide for payments of cash
and the issuance of shares of the Company's common stock and options to purchase
the Company's common stock, at $7 to $11 per share over a six year period. All
common stock issued and options issued during 1996 were at fair market value.
The aggregate commitment under these agreements at January 3, 1997 is
approximately $666,000 in cash, $650,000 worth of common stock, 13,500 shares of
common stock, and options to purchase 55,000 shares of common stock. Included in
other current liabilities at January 3, 1997 and December 29, 1995 is
approximately $411,000 and $505,000, respectively, due to these consultants
payable in cash and shares of the Company's common stock.
NOTE 12 - OTHER LIABILITIES
Included in other current liabilities are approximately $1,573,000 and
$1,567,000 of commissions due to outside sales representatives at January 3,
1997 and December 29, 1995, respectively.
NOTE 13 - RELATED PARTY TRANSACTIONS
The Company has had significant related party transactions as discussed in Notes
4, 10, and 11.
Included in other current assets at December 29, 1995 is a $120,000 note
receivable from one of the Company's officers. The note bears annual interest at
8%, and is payable in monthly installments, with the principal and any unpaid
interest due on April 1, 1997. On February 29, 1996, the Company forgave the
$120,000 note receivable in exchange for the officer's efforts in obtaining
certain patents.
F-21
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 13 - RELATED PARTY TRANSACTIONS (Continued)
During 1996, 1995 and 1994, a law firm, of which a partner is director and
stockholder of the Company, received approximately $322,000, $256,000 and
$525,000 for fees in connection with legal services performed on behalf of the
Company.
The Company pays an override sales commission, based upon a percentage of the
Company's sales, to an officer of the Company. This agreement relates back to
1983, when the officer initially became associated with the Company in a sales
and marketing capacity. Commissions paid or accrued under this arrangement
totaled approximately $412,000, $322,000 and $263,000 during 1996, 1995 and
1994, respectively.
In October 1994, the Company's subsidiary, STAAR Surgical Australasia Pty., Ltd.
purchased the assets of the Company's Australian distributor for approximately
$500,000. An officer of the Company was a director of the distributor and owned
over 50% of its common stock.
In 1994, the Company entered into a four year non-compete agreement with a
former officer and director of the Company. The Company paid the officer
$358,092, and agreed to accept 359,906 shares of the Company's common stock in
payment for $1,940,287 in promissory notes the individual owed the Company. The
shares were returned and the promissory notes were canceled. Included in other
assets at January 3, 1997 and December 29, 1995 were $128,718 and $239,048,
respectively, related to the non-compete agreement. The cost of this agreement
is being amortized on a straight line basis over its four year life. A total of
$110,330, $110,330 and $91,941 was amortized during 1996, 1995 and 1994,
respectively.
NOTE 14 - STATEMENTS OF CASH FLOWS
Net cash provided by operating activities includes interest paid of
approximately $557,000, $419,000 and $206,000 for the years ended January 3,
1997, December 29, 1995 and December 30, 1994, respectively. Income taxes paid
amounted to approximately $1,160,000, $947,000 and $14,800 for the years ended
January 3, 1997, December 29, 1995 and December 30, 1994, respectively.
During 1994, the Company received 359,906 shares of its common stock in exchange
for settlement of notes receivable totaling $1,940,287 from a former officer of
the Company. During 1994, the Company issued common stock with a value of
$500,000 to purchase assets.
Changes in operating working capital as shown in the consolidated statements of
cash flows for the years ended January 3, 1997, December 29, 1995 and December
30, 1994 are comprised of:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Decrease (increase) in:
Accounts receivable $ 553,664 $(2,296,243) $(1,600,712)
Inventories (2,773,969) (1,013,252) (596,314)
Prepaids, deposits and other current assets (758,716) (308,272) (196,531)
Increase (decrease) in:
Accounts payable 283,929 338,771 (329,304)
Other current liabilities (21,607) 248,544 (165,867)
----------- ----------- -----------
Change in operating working capital $(2,716,699) $(3,030,452) $(2,888,728)
=========== =========== ===========
</TABLE>
F-22
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
==========================================
NOTE 15 - FOURTH QUARTER ADJUSTMENTS
During the fourth quarter of 1995, the Company recorded an adjustment in the
amount of approximately $924,000 relating to the recognition of deferred tax
assets. This adjustment increased net income by $924,000 or $.07 per share for
that quarter.
During the fourth quarter of 1994, the Company recorded aggregate adjustments in
the amount of approximately $2,230,000 relating to the recognition of deferred
tax assets of $2,400,000 and to the Company's equity in earnings of joint
venture related to income taxes incurred by Canon-STAAR of $170,000. The
adjustments increased net income by $2,230,000, or $.17 per share for that
quarter.
F-23
<PAGE>
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT ON SCHEDULE AND CONSENT
To the Board of Directors and Stockholders
STAAR Surgical Company and Subsidiaries
The audits referred to in our report dated March 11, 1997, included the related
financial statement schedule as of January 3, 1997, and for each of the three
years in the period ended January 3, 1997, included in the annual report on Form
10-K of STAAR Surgical Company and subsidiaries. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule based on our
audit. In our opinion, such financial statement schedule presents fairly, in
all material respects, the information set forth therein.
We consent to incorporation by reference in the Registration Statement (No. 33-
37248) on Form S-8 of STAAR Surgical Company of our report dated March 11, 1997,
relating to the consolidated balance sheets of STAAR Surgical Company and
subsidiaries as of January 3, 1997 and December 29, 1995 and the related
consolidated statements of income, stockholders' equity, and cash flows and
related schedule for each of the three years in the period ended January 3,
1997, which report appears in the January 3, 1997 annual report on Form 10-K of
STAAR Surgical Company and subsidiaries.
BDO SEIDMAN, LLP
Los Angeles, California
March 11, 1997
F-24
<PAGE>
STAAR SURGICAL COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING
ACCOUNTS AND RESERVES
============================================
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------- -------- -------- -------- --------
Balance at Balance at
beginning end of
Description of year Additions Deductions year
- ----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1996
Allowance for doubtful
accounts deducted from
accounts receivable in
balance sheet $119,000 $ - $ 7,000 $112,000
Reserve for obsolescence
deducted from inven-
tories in balance sheet 31,000 - 31,000 -
-------- -------- -------- --------
$150,000 $ - $ 38,000 $112,000
======== ======== ======== ========
1995
Allowance for doubtful
accounts deducted from
accounts receivable in
balance sheet $307,000 $112,000 $ 300,000 $119,000
Reserve for obsolescence
deducted from inven-
tories in balance sheet 105,000 - 74,000 31,000
-------- -------- -------- --------
$412,000 $112,000 $ 374,000 $150,000
======== ======== ======== ========
1994
Allowance for doubtful
accounts deducted from
accounts receivable in
balance sheet $250,000 $121,000 $64,000/(2)/ $307,000
Reserve for obsolescence
deducted from inven-
tories in balance sheet 114,000 - 9,000/(3)/ 105,000
-------- -------- -------- --------
$364,000 $121,000 $ 73,000 $412,000
======== ======== ======== ========
- ------------
</TABLE>
/(1)/ Represents allowance for uncollectible receivables.
/(2)/ Writeoffs.
/(3)/ Obsolete inventory written down to zero value.
F-25
<PAGE>
EXHIBIT 4.5
1996 STAAR SURGICAL COMPANY NON-QUALIFIED STOCK PLAN
STAAR Surgical Company, a corporation organized under the laws of the State
of Delaware, hereby adopts this 1996 STAAR Surgical Company Non-Qualified Stock
Plan.
PURPOSE OF PLAN
---------------
WHEREAS, the purpose of this 1996 STAAR Surgical Company Non-Qualified
Stock Plan is to advance the interests of the STAAR Surgical Company by helping
STAAR Surgical Company to obtain and retain the services of qualified
individuals from whose judgment, initiative, efforts and services STAAR Surgical
Company will benefit, by providing those persons with the opportunity to become
owners of capital stock of STAAR Surgical Company.
NOW, THEREFORE, the Board of Directors has adopted the terms and conditions
of that certain 1996 Staar Surgical Company Executive Non-qualified Stock
Option Plan, as follows:
TERMS AND CONDITIONS OF PLAN
----------------------------
1. DEFINITIONS.
-----------
Set forth below are definitions of capitalized terms which are
generally used throughout this Plan, or references to the provisions containing
such definitions (Capitalized terms used only in a specific Section are defined
in such Section):
(a) AFFILIATE - The term "Affiliate" is defined as any person
---------
controlling the Company, controlled by the Company, or under common control with
the Company.
(b) AWARD(S) - The term "Award(s)" is individually and collectively
--------
defined as any Option(s) or Award Share(s) granted under this Plan.
(c) AWARD SHARES - The term "Award Shares" is defined as shares of
------------
Common Stock granted by the Plan Committee in accordance with Section 6 of this
---------
Plan.
(d) BOARD - The term "Board" is defined as the Board of Directors of
-----
the Company, as such body may be reconstituted from time to time.
(e) COMMON STOCK - The term "Common Stock" is defined as the
------ -----
Company's common stock, par value $.001.
(f) COMPANY - The term "Company" is defined as STAAR Surgical
-------
Company, a Delaware corporation.
(g) ELIGIBLE PERSON - The term "Eligible Person" means any Person
---------------
who, at a particular
1
<PAGE>
time, is an employee to the Company or an Affiliate who provides bona fide
services to the Company or the Affiliate, provided, however, no Award hereunder
-------- -------
may be granted to any Person in connection with the provision of any services
incident to the raising of capital.
(h) FAIR MARKET VALUE - The term "Fair Market Value" means the fair
-----------------
market value as of the applicable valuation date, of the shares of Common stock
which are awarded or are subject to the option, as the case may be, to be valued
(the "Subject Shares"), determined in accordance with the following principles:
------- ------
(i) If the Common Stock is traded on a stock exchange on the date
in question, then the Fair Market Value of the Subject Shares will be equal
to the closing bid price of Common Stock on the principal exchange on which
the Common Stock is then trading, or, if Common Stock is not traded on such
date, then on the next preceding trading day during which a sale occurs;
(ii) If the Common Stock is traded over-the-counter on the NASDAQ
National Market System on such date, the Fair Market Value of the Subject
Shares will equal (1) if the Common Stock is then listed as a National
Market Issue under the NASDAQ National Market System, the last sales price;
or (2) in all other cases, the mean between the closing representative bid
and asked prices for the Common Stock on such date as reported by NASDAQ or
such successor quotation system;
(iii) If the Common Stock is traded over-the-counter on NASDAQ
(other than on the NASDAQ National Market System) on the date in question,
then the Fair Market Value of the Subject Shares will equal the mean
between the closing representative bid and asked price for the Common Stock
on such date as reported by NASDAQ;
(iv) If the Common Stock is not publicly traded on an exchange and
is not quoted on the NASDAQ or a successor quotation system, then the Fair
Market Value shall be determined by the Board acting in good faith on such
basis as it deems appropriate;
(v) If the Subject Shares are unregistered securities (and thus
are considered "restricted stock" within the meaning of Section 144 of the
Securities Act), or if the Subject Shares are subject to conditions, risk
of forfeiture, or repurchase rights or rights of first refusal which impair
its value including, without limitation, those conditions more particularly
described in Section 7, then the Fair Market Value of the Subject Shares
---------
shall be subject to such discount to reflect such impairments to value as
the Plan Committee may, in its sole discretion and without obligation to do
so, determine to be appropriate; and
(vi) Anything in Subsections (i) through (v) above to the
--------------- ---
contrary, under no circumstances shall the Fair Market Value of the Subject
Shares be less than its par value.
(i) ISSUED SHARES - The term "Issued Shares" is defined as shares of
-------------
Common Stock issued pursuant to the terms of this Plan (i.e, Option Shares or
Award Shares, including Option Shares or Award Shares that may also be deemed
Restricted Shares).
(j) OPTION - The term "Option" is defined as an option to purchase
------
Common Stock granted by the Plan Committee pursuant to the terms of the Plan
and, in particular, the terms of Section 5 of the Plan.
---------
(k) OPTION PRICE - The term "Option Price" is defined in Section 5(b)
------------ ------------
of this Plan.
2
<PAGE>
(l) OPTION SHARES - The term "Option Shares" is defined as the shares
-------------
of Common Stock which an Option entitles the holder thereof to purchase.
(m) PERSON - The term "Person" is defined, in its broadest sense, as
------
any individual, entity or fiduciary such as, by way of example and not
limitation, individual or natural persons, corporations, partnerships (limited
or general), joint-ventures, associations, limited liability
companies/partnerships, or fiduciary arrangements, such as trusts.
(n) PLAN - The term "Plan" is defined as this 1996 STAAR Surgical
----
Company Non-Qualified Stock Plan.
(o) PLAN COMMITTEE - The term "Plan Committee" is defined as that
--------------
Committee appointed by the Board to administer and interpret this Plan as more
particularly described in Section 3 of the Plan; provided, however, that the
--------- -------- -------
term Plan Committee will refer to the Board during such times as no Plan
Committee is appointed by the Board.
(p) RESTRICTED SHARES - The term "Restricted Shares" is defined as
-----------------
Option Shares or Award Shares, as the case may be, that are subject to
restrictions as more particularly set forth in Section 7 of this Plan.
---------
(q) RECIPIENT - The term "Recipient" is defined as any Eligible Person
---------
who, at a particular time, receives the grant of an Award.
(r) SECURITIES ACT - The term "Securities Act" is defined as the
--------------
Securities Act of 1933, as amended (references herein to Sections of the
Securities Act are intended to refer to Sections of the Securities Act as
enacted at the time of the adoption of this Plan by the Board and as
subsequently amended, or to any substantially similar successor provisions of
the Securities Act resulting from recodification, renumbering or otherwise).
(s) TRANSFER - The term "Transfer" is defined as any transfer or
--------
alienation of an Award which would directly or indirectly change the legal or
beneficial ownership thereof, whether voluntary or by operation of law, or with
or without the payment or provision of consideration, including, by way of
example and not limitation: (i) the sale, assignment, bequest or gift of the
Award; (ii) any transaction that creates or grants an option, warrant, or right
to obtain an interest in the Award; (iii) any transaction that creates a form of
joint ownership in the Award between the Recipient and one or more other
Persons(s); (iv) any Disposition of the Award to a creditor of the Recipient,
including the hypothecation, encumbrance or pledge of the Award or any interest
therein, or the attachment or imposition of a lien by a creditor of the
Recipient on the Award or any interest therein which is not released within
thirty (30) days after the imposition thereof; (v) any distribution by a
Recipient which is an entity to its stockholders, partners, co-venturers or
members, as the case may be; or (vi) any distribution by a Recipient which is a
fiduciary, such as a trustee or custodian, to its settlors or beneficiaries.
2. TERM OF PLAN.
------------
This Plan shall be effective as of such time and date as this Plan is
adopted by the Board, and this Plan shall terminate on the first business day
prior to the tenth anniversary of the date this Plan became effective. No
grants of Options shall be made under this Plan before the date this Plan
becomes effective or after the date this Plan terminates; provided, however,
-------- -------
that (i) all Awards granted pursuant to this Plan prior to the
3
<PAGE>
effective date of this Plan shall not be affected by the termination of this
Plan; and (ii) all other provisions of this Plan shall remain in effect until
the terms of all outstanding Awards have been satisfied or terminated in
accordance with this Plan and the terms of such Awards.
3. PLAN ADMINISTRATION.
-------------------
(a) PLAN COMMITTEE.
--------------
(i) The Plan shall be administered and interpreted by a committee
consisting of two (2) or more members of the Board; provided, however, no
-------- -------
member of the Board who may serve as a member of the Plan Committee if such
person serves or served as a member of the Plan Committee with respect to
any other plan of the Company or its Affiliates, which plan was or is
established to comply with the provisions of Rule 16b-3(c)(2)(i) under the
Securities and Exchange Act of 1934, as amended (i.e., pertaining to the
establishment of so-called "Section 16b-3 Plans"), and, (b) by reason of
such person's proposed service as a member of the Plan Committee, such
person would not be considered a "disinterested" person within the meaning
of said Rule with respect to such other plan.
(ii) Members of the Plan Committee may resign at any time by
delivering written notice to the Board. Vacancies on the Plan Committee
shall be filled by the Board. The Plan Committee shall act by a majority
of its members in office. The Plan Committee may act either by vote at a
meeting or by a memorandum or other written instrument signed by a majority
of the members of the Plan Committee.
(iii) If the Board, in its discretion, does not appoint a Plan
Committee, the Board itself will administer and interpret the Plan and take
such other actions as the Plan Committee is authorized to take hereunder;
provided that the Board may take such actions hereunder in the same manner
as the Board may take other actions under the Certificate of Incorporation
and bylaws of the Company generally.
(b) ELIGIBILITY OF PLAN COMMITTEE MEMBERS TO RECEIVE AWARDS. While
-------------------------------------------------------
serving on the Plan Committee, members of the Plan Committee shall not be
eligible for selection as Eligible Persons to whom an Award may be granted under
the Plan.
(c) POWER TO MAKE AWARDS. Subject only to the Certificate of
--------------------
Incorporation of the Company and the express terms and conditions of this Plan,
the Plan Committee shall have the full and final authority, in its sole
discretion, at any time and from time-to-time, do any of the following:
(i) Designate the persons or classes of persons eligible to
receive Awards from among the Eligible Persons;
(ii) Grant Awards to such selected Eligible Persons or classes of
Eligible Persons in such form and amount as the Plan Committee shall
determine;
(iii) Impose such limitations, restrictions and conditions upon
any Award as the Plan Committee shall deem appropriate and necessary,
including without limitation the term of Options and any vesting conditions
applicable thereto, and any vesting and repurchase conditions described in
Sections 5 or 7 placed upon grants of Option Shares or Award Shares;
---------- -
4
<PAGE>
(iv) Interpret the Plan, adopt, amend and rescind rules and
regulations relating to the Plan, and make all other determinations and
take all other actions necessary or advisable for the implementation and
administration of the Plan.
In determining the recipient, form and amount of Awards, the Plan
Committee shall consider any factors deemed relevant, including the various
individuals' functions, responsibilities, value of services to the Company, and
past and potential contributions to the Company's profitability and sound
growth.
(d) INTERPRETATION OF PLAN. The Plan Committee shall, in its sole and
----------------------
absolute discretion, interpret and determine the effect of all matters and
questions relating to this Plan. The interpretations and determinations of the
Plan Committee under the Plan (including without limitation determinations
pertaining to the eligibility of Persons to receive Awards; the form, amount and
timing of Awards; the methods of payment for Awards; the restrictions and
conditions placed upon Awards; and all other terms and provisions of Awards and
the certificates or agreements evidencing same) need not be uniform, and may be
made by the Plan Committee selectively among Persons who are eligible to receive
Awards under the Plan, whether or not such Persons are similarly situated. All
actions taken and all interpretations and determinations made under this Plan in
good faith by the Plan Committee shall be final and binding upon the Recipient,
the Company, and all other interested Persons. No member of the Plan Committee
shall be personally liable for any action taken or decision made in good faith
relating to this Plan, and all members of the Plan Committee shall be fully
protected and indemnified by the Company to the fullest extent permitted under
applicable law with respect to any such action, determination, or
interpretation.
(e) COMPENSATION; ADVISORS. Members of the Plan Committee shall
----------------------
receive such compensation for their services as members as may be determined by
the Board. All expenses and liabilities incurred by members of the Plan
Committee in connection with the administration of the Plan shall be borne by
the Company. The Plan Committee may, with the approval of the Board, employ
attorneys, consultants, accountants, appraisers, brokers, or other Persons, at
the cost of the Company. The Plan Committee, the Company and its directors
shall be entitled to rely upon the advice, opinions, or valuations of any such
Persons.
4. STOCK POOL.
----------
(a) MAXIMUM NUMBER OF SHARES AUTHORIZED UNDER PLAN. Shares of stock
----------------------------------------------
which may be issued or granted under the Plan shall be authorized and unissued
or treasury shares of Common Stock. The aggregate maximum number of shares of
Common Stock which may be issued in exercise of Options or as a grant of Award
Shares (as the case may be) shall not exceed five hundred thousand (500,000)
shares of Common Stock (the "Stock Pool"); provided, however, that the number of
----- ---- -------- -------
shares available in such stock pool shall be increased by the following:
(i) Any shares of Common Stock tendered by a Recipient as payment
for Option Shares or Award Shares;
(ii) Any warrants, options or rights to shares of Common Stock
surrendered by a Recipient as payment for Option Shares or Award Shares;
(iii) Any shares of Common Stock previously subject to an Option,
which Option for any reason is terminated unexercised or expires; and
5
<PAGE>
(iv) Any Restricted Shares which are granted as Option Shares or
Award Shares, and are subsequently forfeited by the holders thereof.
(b) CALCULATING SHARES AVAILABLE FOR AWARDS. For purposes of
---------------------------------------
calculating the maximum number of shares of Common Stock in the Stock Pool which
are available may be issued under the Plan, the following rules shall apply:
(i) When Options are exercised, and when cash is used as full
payment for shares issued upon exercise of such Options, all the shares
---
issued (including the shares, if any, withheld for tax withholding
requirements) shall be counted;
(ii) When Options are exercised, and when shares of Common Stock
are used as full or partial payment for shares issued upon exercise of such
Options, (if permitted by the Plan Committee), only the net shares issued
---
(including the shares, if any, withheld for tax withholding requirements)
shall be counted; and
(iii) When Award Shares are granted and the Plan Committee elects
to require payment with respect to such grant, and when shares of Common
Stock are used as full or partial payment for the grant of such shares,
only the net shares issued (including the shares, if any, withheld for tax
---
withholding requirements) shall be counted.
(c) DATE OF AWARD. The date an Award is granted shall mean the date
-------------
selected by the Plan Committee as of which the Plan Committee allots a specific
number of shares to a Recipient with respect to an Award pursuant to the Plan.
5. OPTIONS (TO PURCHASE OPTION SHARES).
-----------------------------------
(a) GRANT. The Plan Committee may from time to time, and subject to
-----
the provisions of the Plan and such other terms and conditions as the Plan
Committee may prescribe, grant to any Eligible Person one or more options to
purchase ("Options"), for cash or shares, the number of shares of Common Stock
-------
allotted by the Plan Committee; provided, however, no Option shall be granted to
-------- -------
any Eligible Person who is a member of the Plan Committee. The grant of an
Option shall be evidenced by a written option certificate, executed by the
Company and the Recipient, stating the number of shares of Common Stock subject
to the Option, and stating all the terms and conditions of such Option.
(b) OPTION PRICE. The purchase price per Option Share deliverable
------------
upon the exercise of an Option (the "Option Price") shall be the price as
------ -----
determined by the Plan Committee; provided, however, the Option Price may not be
-------- -------
less than eighty five percent (85%) of Fair Market Value of the underlying
Option Shares as of the date of the grant of the Option.
(c) OPTION TERM; EXPIRATION. The term of each Option shall commence
-----------------------
at the grant date for an Option, as determined by the Plan Committee, and shall
expire on the first business day prior to the tenth anniversary of the date of
grant thereof unless an earlier expiration date is expressly provided for in the
separate option certificate or another Section of this Plan.
(d) EXERCISE DATE. Each Option shall become exercisable on the date
-------------
set forth in the separate option certificate. No Option shall be exercisable
after the expiration of its applicable term. Subject to
6
<PAGE>
the foregoing, each Option shall be exercisable in whole or in part during its
applicable term unless expressly provided otherwise in the separate option
certificate.
(e) VESTING PROVISIONS. The Plan Committee may, in its sole
------------------
discretion, subject Options to be granted to Recipients to such vesting
conditions as it deems appropriate, including but not limited to conditions
pertaining to continued provision of services to the Company or any Affiliate,
or to the attainment of goals; provided, however, in no case shall any Option
-------- -------
provide for the vesting of Option Shares over a period of time which exceeds
five (5) years from date of grant of the Option, or provide for vesting on a
cumulative incremental percentage basis which is less than twenty percent (20%)
per year. If no vesting is expressly provided in the separate option
certificate, the Option shares shall be deemed fully vested upon the date of
grant.
(f) MANNER OF EXERCISE AND PAYMENT. An exercisable Option, or any
------------------------------
portion thereof, may be exercised solely by delivery of each and all of the
following to the Secretary of the Company at his or her office at the principal
executive offices of the Company, prior to the time when such Option (or such
portion) becomes expired or is terminated under this Section 5:
---------
(i) Notice in writing signed by the Recipient or other Person
then entitled to exercise the Option (or portion thereof) stating that such
Option or portion is exercised. Such notice shall comply with the
procedures set forth in the separate option certificate which governs the
exercise of the applicable Option, and any other applicable rules
established by the Plan Committee.
(ii) Full consideration for the shares with respect to which such
Option or portion is being exercised, through one of (or any combination
of) the following:
(1) Immediately available funds, in U.S. dollars, in cash or
by check; and/or
(2) If expressly permitted in the separate option
certificate, or if otherwise consented to by the Plan Committee in
writing:
(A) Shares of Common Stock previously owned by the
Recipient, duly endorsed for transfer to the Company, with a Fair
Market Value on the date of delivery equal to the aggregate
Option Price of the Option Shares with respect to which the
Option or portion is being exercised;
(B) The surrender or relinquishment of rights to
acquire Common Stock previously owned by the Recipient, with a
Fair Market Value on the date of delivery equal to the aggregate
Option Price of the Option Shares with respect to which the
Option or portion is being exercised; or
(C) A full recourse promissory note bearing interest at
a rate not less than the rate which is required to preclude the
imputation of interest under the Internal Revenue Code of 1986,
as amended), and payable upon such terms as may be prescribed by
the Plan Committee. The Plan Committee may also prescribe the
form of such note, and any security to be given for such note.
Notwithstanding the foregoing, no Option may be exercised by
delivery of a promissory
7
<PAGE>
note or by a loan from the Company if such loan or other
extension of credit is prohibited by law at the time of exercise
of this Option, or does not comply with the provisions of
Regulation G promulgated by the Federal Reserve Board with
respect to "Margin Stock," if the Company and the Recipient are
then subject to such Regulation.
(iii) Such documents, representations and undertakings as the Plan
Committee, in its absolute discretion, deems necessary or advisable to
effect compliance with all applicable provisions of the Securities Act, or
any other federal or state securities laws or regulations. In addition,
the Plan Committee may, in its absolute discretion, take whatever
additional actions it deems appropriate to effect such compliance
including, without limitation, placing legends on share certificates and
issuing stop-transfer orders to transfer agents and registrars.
(iv) In the event that the Option or portion thereof shall be
exercised by any Person(s) other than the Recipient, appropriate proof of
the right of such person(s) to exercise the Option or portion thereof.
(g) NON-ASSIGNABILITY. Except as expressly provided in the separate
-----------------
option certificate, Options may not be Transferred by the Recipient, nor
exercised by any Person other than the Recipient, without the prior written
consent of the Company, which consent the Company may withhold in its sole and
absolute discretion. Any Transfer of an Option or Award made in violation of
the terms of this Plan shall be null and void ab initio and of no force and
-- ------
effect.
(h) NO STOCKHOLDER RIGHTS. The Recipient shall not be, nor have any
---------------------
of the rights or privileges of, a stockholder of the Company with respect to the
Option Shares unless and until all conditions for exercise of the Option and the
issuance of certificates for the Option Shares have been satisfied from and
after exercise of an Option in compliance with the terms of this Plan. From and
after the exercise of an Option in compliance with the terms of this Plan and
the applicable option certificate the Recipient shall be a stockholder of the
Company with respect to the Option Shares, and shall thereafter be fully
entitled to receive dividends as and when declared and paid, and to vote and to
exercise all other rights of a stockholder with respect to the Option Shares.
6. AWARD SHARES.
------------
(a) GRANT. The Plan Committee may from time to time, and subject to
-----
the provisions of the Plan and such other terms and conditions as the Plan
Committee may prescribe, grant to any Eligible Person one or more shares of
Common Stock ("Award Shares") allotted by the Plan Committee. The grant of
----- ------
Award Shares or grant of the right to receive Award Shares shall be evidenced by
a separate written agreement confirming such grant, executed by the Company and
the Recipient, stating the number of Award Shares granted, and stating all terms
and conditions of the grant.
(b) PURCHASE PRICE AND MANNER OF PAYMENT. The Plan Committee, in its
------------------------------------
sole discretion, may grant Award Shares in any of the following instances:
(i) As a "bonus" or "reward" for services previously rendered and
compensated, in which case the recipient of the Award Shares shall not be
required to pay any consideration for such
8
<PAGE>
Award Shares, and the value of such Award Shares shall be the Fair Market
Value of such Award Shares on the date of grant;
(ii) As "compensation" for the previous or future performance of
services or attainment of goals, in which case the recipient of the Award
Shares shall not be required to pay any consideration for such Award Shares
(other than the performance of his services), and the value of such Award
Shares received shall be the Fair Market Value of such Award Shares on the
date of grant; or
(iii) In consideration of the payment of a purchase price for such
Award Shares in an amount established by the Plan Committee, which amount
may not be less than eighty-five percent (85%) of the Fair Market Value of
such Award Shares as of the date of grant.
7. RESTRICTED SHARES.
-----------------
(a) VESTING CONDITIONS; FORFEITURE OF UNVESTED SHARES. The Plan
-------------------------------------------------
Committee may subject or condition the grant of Issued Shares (hereinafter
referred to as "Restricted Shares") to such vesting conditions, including but
---------- ------
not limited to the continued provision of services or attainment of goals
subsequent to the date of such grant as the Plan Committee, in its sole
discretion, may deem appropriate. In the event the Recipient does not satisfy
such vesting conditions, the Company may require the Recipient, subject to the
payment terms of Section 7(b), to forfeit such unvested Restricted Shares. All
------------
vesting conditions imposed on the grant of Restricted Shares, including payment
terms complying with Section 7(b), shall be set forth in a separate written
------------
restricted stock agreement, executed by the Company and the Recipient on or
before the time of the grant of such Restricted Shares, stating the number of
Restricted Shares subject to such conditions, and further specifying the vesting
conditions. If no vesting conditions are expressly provided in a separate
restricted stock agreement, the Issued Shares shall not be deemed to be
Restricted Shares, and will not be required to be forfeited. Any grant of
Restricted Shares shall be subject to the following limitations:
(i) In no case shall the vesting conditions require continued
provision of services, subsequent to the grant of Restricted Shares for a
period of time in excess of five (5) years from the date of grant, or
provide for cumulative percentage vesting which is less than twenty
percent (20%) per year;
(ii) In no case shall the Recipient be required to forfeit any
previously vested Restricted Shares; and
(iii) In the event of a forfeiture of any unvested Restricted
Shares, the Company shall pay to the Recipient with respect to all of such
unvested Restricted Shares an amount equal to the original purchase price,
if any, previously paid by the Recipient for such unvested Restricted
Shares.
(b) REPURCHASE PRICE FOR FORFEITED RESTRICTED SHARES. If (i) a
------------------------------------------------
Recipient does not satisfy vesting conditions placed upon Restricted Shares, and
(ii) the Company exercises its right to require the Recipient to forfeit such
unvested Restricted Shares, then the Company shall be required to pay the
Recipient an amount not less than:
(i) The higher of the original purchase price for such Restricted
Shares or the Fair Market Value of such Restricted Shares on the date of
--
the event triggering such repurchase rights; or
9
<PAGE>
(ii) The original purchase price for such vested Restricted
Shares; provided, however, that the right to repurchase in favor of the
-------- -------
Company must lapse at the rate of at least twenty percent (20%) per year
over five (5) years from the date of grant of the Restricted Shares.
The payments to be made by the Company to a Recipient for forfeited
Restricted Shares pursuant to Subsection (ii) may only be in the form of cash or
---------------
cancellation of purchase money indebtedness previously incurred for the purchase
of said Restricted Shares (if any), and must be paid no later than ninety (90)
days after the date of forfeiture.
(c) RESTRICTIVE LEGEND. Until such time as all conditions placed upon
------------------
Restricted Shares lapse, the Plan Committee may place a restrictive legend on
the share certificate representing such Restricted Shares which evidences said
restrictions, in such form and subject to such stop instructions as the Plan
Committee shall deem appropriate. The conditions shall apply to any new,
additional or different securities the Recipient may become entitled to receive
with respect to such Restricted Shares, whether by virtue of a stock split or
stock dividend, or any other change in the corporate or capital structure of the
Company. The Plan Committee shall also have the right, should it elect to do
so, to require the Recipient to deposit the share certificate(s) for the
Restricted Shares with the Company or its agent, endorsed in blank or
accompanied by a duly executed irrevocable stock power or other instrument of
transfer, until such time as the conditions are met or lapse. The Company shall
remove the legend with respect to any Restricted Shares which become vested.
(d) STOCKHOLDER RIGHTS. Notwithstanding the terms of this Section 7,
------------------ ---------
the Recipient of Restricted Shares shall have all rights or privileges of a
stockholder of the Company with respect to the Restricted Shares (with the
exception of Subsections (c) and (e) hereof) and, shall be fully entitled to
-----------------------
receive dividends as and when declared and paid, (if any are declared and paid),
and to vote and to exercise all other rights of a stockholder with respect to
the Restricted Shares.
(e) NON-ASSIGNABILITY. Except as expressly provided in the restricted
-----------------
stock agreement, unvested Restricted Shares may not be Transferred by the
Recipient without the prior written consent of the Company, which consent the
Company may withhold in its sole and absolute discretion. Any putative Transfer
in violation of the terms of this Plan shall be null and void ab initio and of
-- ------
no force and effect.
8. REGISTRATION OF ISSUED SHARES.
------------------------------
(a) REGISTRATION OR EXEMPTION FROM REGISTRATION. Unless expressly
--------------------------------------------
stipulated in the separate option certificate or agreement, the Company shall
not be required at any time to register the Issued Shares under the Securities
Act (including without limitation any primary or secondary offering, or pursuant
to Form S-8), or to register or qualify the Issued Shares under the securities
laws of any state or territory (including without limitation as to Section 25110
of the California Securities Act).
In the event the Company is not required to register or qualify the
Issued Shares, the Issued Shares shall be issued in reliance upon such
exemptions from registration or qualification under federal and state securities
laws, as the case may be, as the Company and its legal counsel, in their
reasonable discretion, shall determine, including without limitation:
(i) In the case of federal securities laws, any of the following,
if available: Section 3(b) of the Securities Act for limited offerings, and
Rules 504 and/or 505 of Regulation D promulgated thereto; and/or Section
4(2) of the Securities Act for private offerings and Rule 506 of Regulation
D
10
<PAGE>
promulgated thereunder; and
(ii) In the case of California securities laws, Section 25102(f)
of the California Securities Act of 1968, as amended; or, if the Recipient
is then a resident of and/or domiciled within another state, the
requirements of any applicable exemptions from registration or
qualification afforded by the securities laws of such state.
If requested by the Company, the Recipient shall provide such further
representations or documents as the Company or its legal counsel, in their
reasonable discretion, deem necessary or advisable in order to effect compliance
with the conditions of any of the aforesaid exemptions from federal or state
registration or qualification upon which it has elected to rely, or with all
applicable rules and regulations of any applicable securities exchanges. If
required by the Company, the Recipient shall provide a letter from a purchaser
representative with credentials reasonably acceptable to the Company to the
effect that such purchaser representative has reviewed the Recipient's proposed
investment in the Issued Shares and has determined that an investment in the
Issued Shares: (A) is appropriate in light of the Recipient's financial
circumstances; (B) that the purchaser representative and, if applicable, the
Recipient, have such knowledge and experience in financial and business matters
that they are capable of evaluating the merits and risks of an investment in the
Issued Shares; and (C) that the purchaser representative (and, if applicable,
the Recipient), have such business or financial experience that they can be
reasonably assumed to have the capacity to protect the Recipient's interests in
connection with the purchase of the Issued Shares.
In the event the Company is unable to obtain, without undue burden or
expense, such consents or approvals as may be required from any applicable
regulatory authority, or which may be deemed reasonably necessary or advisable
by legal counsel for the Company with respect to the applicable exemptions from
federal or state registration or qualification, the Company shall have no
obligation under this Agreement to issue or sell the Issued Shares until such
time as such consents or approvals may be reasonably obtained without undue
burden or expense. The Company shall be have no liability with respect to its
ability or inability to obtain compliance with the requirements of any
exemption, registration or qualification under either federal or state
securities law, issue or sell the Issued Shares.
(b) LEGEND. In the event the Company delivers shares pursuant to one
------
or more exemptions under applicable securities laws, the Company reserves the
right to place the following legend (or such other legend as its deems
necessary) on the share or option certificate(s) to comply with any federal,
state and/or territory securities laws, or to comply with any exemption from
registration or qualification thereunder which is being relied upon by the
Company.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN (1)
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION AFFORDED BY SUCH ACT, OR (2)
REGISTERED OR QUALIFIED, AS THE CASE MAY BE, UNDER THE SECURITIES LAWS
OF THE UNITED STATES OR ANY STATE OR TERRITORY OF THE UNITED STATES
WHICH MAY BE APPLICABLE INCLUDING, WITHOUT LIMITATION, THE CALIFORNIA
SECURITIES ACT OF 1968, AS AMENDED, IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION OR QUALIFICATION, AFFORDED BY SUCH STATE OR TERRITORIAL
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE HOLDER'S
OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW FOR RESALE OR
11
<PAGE>
DISTRIBUTION. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS
(A) THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS WELL
AS UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED
STATES AS MAY THEN BE APPLICABLE, OR (B) THE TRANSFER AGENT (OR THE
COMPANY IF THEN ACTING AS ITS TRANSFER AGENT) IS PRESENTED WITH EITHER
A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE COMPANY OR A NO-
ACTION OR INTERPRETIVE LETTER FROM THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION AND ANY APPLICABLE STATE OR TERRITORIAL SECURITIES
REGULATORY AGENCY TO THE EFFECT THAT SUCH REGISTRATION OR
QUALIFICATION, AS THE CASE MAY BE, IS NOT REQUIRED UNDER THE
CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
9. ADJUSTMENTS.
-----------
(a) SUBDIVISION OR STOCK DIVIDEND. If outstanding shares of Common
-----------------------------
Stock shall be subdivided into a greater number of shares by reason of
recapitalization or reclassification the, (i) the number of shares of Common
Stock, if any, available for issuance in the Stock Pool shall be proportionately
increased, and (ii) the Option Price of any outstanding Options in effect
immediately prior to such subdivision or at the record date of such dividend
shall, simultaneously with the effectiveness of such subdivision or immediately
after the record date of such dividend, be proportionately decreased.
Conversely, if the outstanding shares of Common Stock shall be combined into a
smaller number of shares, the number of shares of Common Stock, if any,
available for issuance in the Stock Pool to be purchased shall be
proportionately reduced; (iii) and the Option Price of any outstanding Option in
effect immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately decreased.
(b) ADJUSTMENT TO OPTION PRICE. When any adjustment is required to be
--------------------------
made in the Option Price, the number of shares purchasable upon the exercise of
any outstanding Option shall be adjusted to that number of shares determined by:
(i) multiplying an amount equal to the number of shares to be purchased upon the
exercise of the Option immediately prior to such adjustment, by the Option Price
in effect immediately prior to such adjustment, and then (ii) dividing that
product by the Option Price in effect immediately after such adjustment.
Notwithstanding the foregoing, no fractional shares shall be issued, and any
fractional shares resulting from computations pursuant to this Section 10 shall
----------
be eliminated from the Option.
(c) CAPITAL REORGANIZATION OR RECLASSIFICATION; CONSOLIDATION OR
------------------------------------------------------------
MERGER. In case of any capital reorganization or any reclassification of Common
- ------
Stock (other than a recapitalization described in Section 10(a); or the
-------------
consolidation, merger, combination or exchange of shares with another entity; or
the divisive reorganization of the Company, the Recipient shall thereafter be
entitled upon exercise of the Option to purchase the kind and number of shares
of stock or other securities or property of the Company (or its successor(s))
which such Option would entitle the Recipient to purchase from the Company
immediately prior to such event. In every such case, the Company may
appropriately adjust the number of shares of Common Stock in the Stock Pool
which may be issued under the Plan, the number of shares of Common Stock subject
to Options previously granted under the Plan, the Option Price of Options
previously granted under the Plan, and any and all other matters deemed
appropriate by the Plan Committee.
(d) ADJUSTMENTS DETERMINED IN SOLE DISCRETION OF BOARD. To the extent
--------------------------------------------------
that the foregoing adjustments relate to stock or securities of the Company,
such adjustments shall be made by the Plan Committee, whose determination in
that respect shall be final, binding and conclusive.
(e) NO OTHER RIGHTS TO RECIPIENT. Except as expressly provided in
----------------------------
this Section 10: (i) the Recipient shall have no rights by reason of any
----------
subdivision or consolidation of shares of stock of any class or the payment of
any stock dividend or any other increase or decrease in the number of shares of
stock of any class; and (ii) the dissolution,
12
<PAGE>
liquidation, merger, consolidation or divisive reorganization or sale of assets
or stock to another corporation, or any issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number of, or the Option Price for, the shares. The grant of an Award
pursuant to this Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of in
capital or business structure; or to merge, consolidate, dissolve or liquidate;
or to sell or transfer all or any part of its business or assets.
10. PERFORMANCE ON BUSINESS DAY.
---------------------------
In the event the date on which a party to this Plan is required to
take any action under the terms of this Plan is not a business day, the action
shall, unless otherwise provided herein, be deemed to be required to be taken on
the next succeeding business day.
11. EMPLOYMENT STATUS.
-----------------
In no event shall the granting of an Award be construed as granting a
continued right of employment to any Recipient or to affect any right which the
Company may have to terminate the employment of such Person, at any time, with
or without cause, subject to the terms of a written agreement executed by such
Person and the Company.
12. NON-LIABILITY FOR DEBTS.
-----------------------
No Options granted hereunder, or unvested Restricted Shares granted
hereunder, or any part thereof, shall be subject to the debts, contracts, or
liabilities of a Recipient or such Recipient's successors in interest; or shall
be subject to disposition by Transfer, alienation, or any other means whether
such disposition be voluntary or involuntary or by operation of law, by
judgment, levy, attachment, garnishment, or any other legal or equitable
proceeding (including bankruptcy), and any such attempted disposition thereof
shall be null and void ab initio and of no further force and effect.
-- ------
13. AMENDMENT AND DISCONTINUATION OF PLAN; MODIFICATION OF AWARDS.
-------------------------------------------------------------
(a) AMENDMENT, MODIFICATION OR TERMINATION OF PLAN. The Board may
----------------------------------------------
amend the Plan or suspend or discontinue the Plan at any time or from time-to-
time; provided, however no such action may adversely alter or impair any Award
-------- -------
previously granted under this Plan without the written consent of each Recipient
affected thereby.
(b) MODIFICATION OF TERMS OF OUTSTANDING OPTIONS. Subject to the
--------------------------------------------
terms and conditions of this Plan, the Plan Committee may modify, extend or
renew outstanding Options granted under this Plan, (including vesting
conditions), or accept the surrender of outstanding Options (to the extent not
exercised), and authorize the granting of new Options in substitution therefor.
Notwithstanding the foregoing, no modification of any outstanding Option may,
without the written consent of the Recipient affected thereby, adversely alter
or impair such Recipient's rights under such Option.
(c) MODIFICATION OF RESTRICTED SHARE VESTING CONDITIONS. Subject to
---------------------------------------------------
the terms and conditions of this Plan, including vesting conditions, the Plan
Committee may modify the conditions placed upon the grant of any Restricted
Shares; provided, however, no modification of any conditions placed upon
-------- -------
Restricted Shares may, without the written consent of the Recipient thereof,
adversely alter or impair such Recipient's rights with respect to such
Restricted Shares.
(d) COMPLIANCE WITH LAWS. The Plan Committee may at any time or from
--------------------
time-to-time, without receiving further consideration from any Person who may
become entitled to receive or who has received the grant of an Award hereunder,
modify or amend Awards granted under this Plan as required to: (i) comport with
changes in securities, tax or other laws or rules, regulations or regulatory
interpretations applicable to this Plan or to Awards hereunder, or to comply
with stock exchange rules or requirements, and/or (ii) ensure that this Plan is
and remains exempt from the application of any participation, vesting, benefit
accrual, funding, fiduciary, reporting, disclosure, administration or
enforcement requirement of either the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the corresponding provisions of the
13
<PAGE>
Internal Revenue Code of 1986, as amended (Subchapter D of Title A, Chapter 1 of
the Code, encompassing Sections 400 to 420 of the Code). Notwithstanding the
------------ ---
foregoing, no such modification may, without the consent of the holder thereof,
adversely alter or impair a Person's rights with respect to such Awards.
1. WITHHOLDING TAXES.
-----------------
As a condition of the grant of any Award and/or the exercise of any
Option, the Company shall have the right to require the Recipient to remit to
the Company an amount sufficient to satisfy any federal, state and/or local
withholding tax requirements incident to such grant or exercise.
Notwithstanding the foregoing, whenever the Company is delivering any shares of
Common Stock the Company may, in its sole discretion, but without obligation to
do so, deliver such shares of Common Stock net of the number of shares
sufficient to satisfy any withholding tax requirements incident to such
issuance. For withholding tax purposes, the shares of Common Stock shall be
valued on the date the withholding obligation is incurred by the Company.
* * * * *
The undersigned hereby certifies that the foregoing 1996 STAAR Surgical
Company Non-Qualified Stock Plan was duly adopted effective as of the sixth day
of May, 1996, by the Board of Directors of STAAR Surgical Company.
/s/ William C. Huddleston
------------------------------------
William C. Huddleston, Secretary
14
<PAGE>
STAAR 1.4 EXHIBIT 10.8
PROMISSORY NOTE
---------------
(SECURED BY STOCK PLEDGE/SECURITY AGREEMENT)
-------------------------------------------
$1,301,745.00 FEBRUARY 28, 1991
MONROVIA, CALIFORNIA
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, JOHN R. WOLF, A MARRIED MAN (hereinafter "Maker"), hereby promises
-----
to pay to STAAR SURGICAL COMPANY, A DELAWARE CORPORATION, or order (hereinafter
"Holder"), at the address hereinbelow designated on the signature page of this
------
Note, or such other place as Holder may designate by written notice to Maker,
the principal sum hereinbelow described (hereinafter the "Principal Amount"),
--------- ------
together with interest thereon, in the manner and at the times hereinbelow
provided and subject to the terms and conditions hereinbelow described.
1. PRINCIPAL AMOUNT.
----------------
The Principal Amount means the sum of One Million Three Hundred One
Thousand Seven Hundred Forty Five and No/100 Dollars ($1,301,745.00).
2. INTEREST.
--------
Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the date of this Note at the lesser of eight percent (8%) or
that fixed rate of interest (as of the date of this Note) which equals the
minimum applicable rate of simple interest (as of the date of this Note) which
will avoid the imputation of income to Maker. Interest shall be computed on the
basis of a three hundred sixty (360) day year and a thirty (30) day month.
3. PAYMENT OF PRINCIPAL AND INTEREST.
---------------------------------
Subject to Paragraph 7, the Principal Amount and accrued and unpaid
interest on the Principal Amount and all other indebtedness under this Note
shall be paid on February 28, 1994. Until such date, all interest on this Note
shall accrue.
4. PREPAYMENTS.
-----------
Maker shall have the right to prepay any portion of the Principal
Amount without prepayment penalty or premium or discount.
5. MANNER OF PAYMENTS/CREDITING OF PAYMENTS.
----------------------------------------
Payments of any amount required hereunder shall be made solely in
lawful money of the United States, without deduction or offset, and shall be
credited first against accrued but
<PAGE>
unpaid interest, if any, and thereafter against the unpaid balance of the
Principal Amount.
6. Security.
---------
The payment of this Note is secured by a Stock Pledge/Security
Agreement (hereinafter the "Security Agreement") executed by Maker in favor of
------------------
Holder of even date herewith with respect to certain common stock of Holder
owned by Maker. The Security Agreement contains provisions for acceleration of
the maturity of this Note on the occurrence of certain described events.
7. Acceleration Upon Default.
--------------------------
At the option of Holder, all or any part of the indebtedness of Maker
hereunder shall immediately become due and payable, irrespective of any agreed
maturity, upon the happening of any of the following events of default ("Event
-----
of Default"):
- ----------
(a) Upon the occurrence of any event of default described under
the Security Agreement;
(c) If any of the following events constituting default occurs,
provided, however, that if any such event of default is reasonably susceptible
of being cured, Maker shall be entitled to a grace period of thirty (30) days
following written notice of such event of default to cure it, and further
provided, that if such event of default is of such character as to reasonably
require more than thirty (30) days to cure, Maker has promptly commenced to cure
said events of default within the thirty (30) day period and uses reasonable
diligence thereafter in curing such events of default, the thirty (30) day
period shall be reasonably extended (but not to exceed one hundred twenty days
(120)):
(i) If Maker shall breach any non-monetary condition or
obligation imposed on Maker pursuant to the terms of this Note;
(ii) If Maker shall make an assignment for the benefit of
creditors;
(iii) If a custodian, trustee, receiver, or agent is appointed
or takes possession of substantially all of the property of Maker;
(iv) If Maker becomes insolvent as that terms is defined in
Section 101(26) of Title 11 of the United States Code;
(v) If Maker shall (A) file a petition with the Bankruptcy Court
under the Bankruptcy Code, or (B) otherwise file any petition or apply to
any tribunal for appointment of a custodian, trustee, receiver, or agent of
Maker, or commence any proceeding related to Maker under any bankruptcy or
reorganization
<PAGE>
statute, or under any arrangement, insolvency, readjustment of debt,
dissolution, or liquidation law of any jurisdiction, whether now or
hereafter in effect;
(vi) If any petition is filed against Maker under the Bankruptcy
Code and either (A) the Bankruptcy Code orders relief against Maker under
the chapter of Bankruptcy Code under which the petition was filed, or (B)
such petition is not dismissed by the Bankruptcy Court within thirty (30)
days of the date of filing;
(vii) If any petition or application of the type described in
Subparagraph (v)(A) above is filed against Maker, or any proceeding of the
type described in Subparagraphs (v)(A) or (v)(B) above is commenced, and
either (1) Maker, by any act, indicates his approval thereof, consent
thereto, or acquiescence therein, or (2) an order is entered appointing any
such custodian, trustee, receiver, or agent, adjudicating Maker bankrupt or
insolvent, or approving such petition or application in any such
proceeding, and any such order remains in effect for more than thirty (30)
days;
(viii) If any attachment, execution, or other writ is levied on
substantially all of the assets of Maker and remains in effect for more
than fifteen (15) days.
8. Collection Costs and Attorneys' Fees.
------------------------------------
(a) Maker agrees to pay Holder all costs and expenses, including
actual attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of the Note or any instrument securing payment of this
Note, including defending the priority of such instrument or as a result of
foreclosure against, or conducting a trustee sale thereunder.
(b) In the event any party institutes or should the parties
otherwise become a party to any action or proceeding in connection with the
enforcement or interpretation or collection of this Note or any instrument
securing payment of this Note, or for damages by reason of any alleged breach of
this Note or any provision hereof or any alleged breach of any instrument
securing payment of this Note or any provision thereof, or for a declaration of
rights in connection with this Note or any instrument securing payment of this
Note, or for any other relief, including equitable relief, in connection with
this Note or any instrument securing payment of this Note, the prevailing party
in any such action or proceeding shall be entitled to receive from the non-
prevailing party all costs and expenses including, without limitation, actual
attorneys' and other fees incurred by the prevailing party in connection with
such action or proceeding.
9. Notice.
------
Any notice to Maker provided for in this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing
<PAGE>
such notice by first class or certified mail, return receipt requested,
addressed to Maker at the address set forth below where this Note is executed,
or to such other address as Maker may designate by written notice to Holder. Any
notice to Holder shall be given by personal delivery or by express mail, Federal
Express, DHL or similar airborne/overnight delivery service, or by mailing such
notice by first class or certified mail, return receipt requested, to Holder at
the address set forth below where this Note is executed, or at such other
address as may have been designated by written notice to Maker. Mailed notices
shall be deemed delivered and received three (3) days after deposit in
accordance with this provision in the United States mail.
10. Usury Compliance.
----------------
All agreements between Maker and Holder are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note or any agreement securing
payment of this Note or executed in connection with this Note after timely
performance of such provision is due, shall involve transcending the limit of
validity prescribed by law which a court of competent jurisdiction deems
applicable, then the obligations to be fulfilled shall be reduced to the limit
of such validity, and if, under any circumstances whatsoever, Holder shall ever
receive as interest an amount that exceeds the highest lawful rate, the amount
that would be excessive interest shall be applied to the reduction of the unpaid
Principal Amount and/or late charges under this Note and not to the payment of
interest, or, if such excessive interest exceeds the unpaid balance of the
Principal Amount and/or late charges under this Note, such excess shall be
refunded to Maker.
11. General.
-------
(a) No delay or omission on the part of Holder in exercising any
rights under this Note or under any instrument given to secure this Note, on
default by Maker, including, without limitation, Holder's right to accelerate,
nor reinstatement of this Note by Holder after such exercise, shall operate as a
waiver of Maker's right to exercise such right or of any other right under this
Note or the instruments given to secure this Note, for the same default or any
other default.
(b) Except for the provision of written notice hereinabove set
forth, Maker hereby waives presentment for payment, demand, protest, notice of
protest and notice of dishonor, and all other notices to which Maker might
otherwise be entitled, and further waives the right to require Holder to proceed
against any security for this Note before proceeding against Maker, and further
waives all defenses based on release of security or extension of time or other
indulgence given in respect to payment of this Note.
(c) Holder shall have the right to sell, assign, or otherwise
transfer, either in part or in its entirety, this Note, and any instrument
evidencing or securing the indebtedness of this Note
<PAGE>
(provided such instrument is transferred as security for the portion of the Note
which is conveyed), without the consent of Maker. The assignment of this Note by
Holder shall be ineffective until actual notice of same is received by Maker.
Maker shall have no right to delegate its duties under this Note or any
instrument securing this Note without the written consent of Holder, which
consent Holder shall not unreasonably withhold, provided, however, no delegation
of such duties or obligations shall release Maker from any duty or obligation
under this Note or instrument securing payment of this Note.
(d) Subject to the foregoing Subparagraph (c), this Note and all of
the covenants, promises, and agreements contained in it shall be binding on and
inure to the benefit of the respective legal and personal representatives,
devises, heirs, successors, and assigns of Maker and Holder.
(e) This writing is intended by the parties to be an integrated and
final expression of this Note and also is intended to be a complete and
exclusive statement of the terms of that agreement. No course of prior dealing
between the parties, no usage of trade, and no parol or extrinsic evidence of
any nature shall be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Note except as
specifically provided herein.
(f) If any provision of this Note, or the application of it to any
party or circumstance, is held to be invalid, the remainder of this Note, and
the application of such provision to other parties or circumstances, shall not
be affected thereby, the provisions of this Note being severable in any such
instance.
(g) This Note shall be governed by, interpreted under and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into in the State of California, by residents of the State
of California, and intended to be performed entirely within the State of
California. Any action to enforce payment of this Note shall be filed and heard
solely in the Municipal or Superior Court of Los Angeles County, California.
(h) Time is of the essence for each and every obligation under this
Note.
MAKER:
/s/ John R. Wolf
--------------------------
John R. Wolf
MAKER'S ADDRESS:
Mr. John R. Wolf
c/o Staar Surgical Company
<PAGE>
1911 Walker Avenue
Monrovia, CA 91016
HOLDER'S ADDRESS:
Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
DO NOT DESTROY THIS NOTE; WHEN PAID, THIS NOTE
MUST BE SURRENDERED TO MAKER FOR CANCELLATION
<PAGE>
STAAR 1.1 EXHIBIT 10.9
STOCK PLEDGE/SECURITY AGREEMENT
-------------------------------
This STOCK PLEDGE/SECURITY AGREEMENT (hereinafter "Agreement") is made and
entered into this 28th day of February, 1991, by and between John R. Wolf, a
married man ("Pledgor"), Pollet & Associates, a California corporation
("Pledgeholder"), and Staar Surgical Company, a Delaware corporation ("Pledgee")
with reference to the following facts:
RECITALS
--------
WHEREAS, Pledgor has borrowed the sum of One Million Three Hundred One
Thousand Seven Hundred Forty Five Dollars ($1,301,745.00) from Pledgee pursuant
to the terms of a Promissory Note attached hereto as Exhibit "1" and
incorporated herein by this reference ("Note"), and
WHEREAS, Pledgor desires to pledge his interest in certain common stock,
pursuant to the terms of this Agreement, for the purpose of securing Pledgor's
indebtedness to Pledgee for the unpaid balance of the Note.
NOW, THEREFORE, in consideration of mutual covenants and promises contained
herein, and for valuable consideration, the receipt and sufficiency which are
hereby mutually acknowledged and confessed, the parties to this Agreement
(hereinafter collectively "parties" and individually "party") agree as follows:
AGREEMENT
---------
1. PLEDGE OF STOCK AND PROCEEDS.
----------------------------
(a) Pledge. As collateral security for the payment and/or performance
------
of all of Pledgor's presently existing or hereinafter arising obligations and
liabilities to Pledgee under the Note, Pledgor agrees to deliver, pledge and
grant to Pledgeholder, concurrently with the execution of this Agreement, a
continuing security interest in the following:
(i) the shares of common stock which are set forth on Exhibit
"2" to this Agreement ("Stock").
(ii) the proceeds of the Stock including, without limitation,
any and all dividends, cash, instruments and other property from time-to-time
received, receivable, or otherwise distributed in respect of or in exchange for
any of the Stock ("Proceeds"). The Stock and the Proceeds shall hereinafter be
collectively referred to as the "Collateral").
(b) Delivery of Stock to Pledgeholder. Pledgor agrees to deliver to
---------------------------------
1
<PAGE>
Pledgeholder, upon execution of this Agreement, the certificate(s) representing
the Stock. Upon execution of this Agreement, Pledgor shall deliver to
Pledgeholder an Assignment of Corporate Shares in the form of Exhibit "3"
attached hereto and incorporated herein by this reference ("Stock Assignment"),
signed by Pledgor, in blank, such Stock Assignment to be used by Pledgeholder in
accordance with the terms of this Agreement.
(c) Notification of Payments Under Note. Pledgee agrees to notify
-----------------------------------
Pledgeholder of all amounts collected in accordance with the terms and
conditions of the Note, including final satisfaction of the Note, at which time
Pledgee shall direct Pledgeholder to return the Collateral to Pledgor.
(c) Pledgeholder's Acceptance of Collateral and Appointment as
----------------------------------------------------------
Pledgor's Attorney-In-Fact. Pledgeholder hereby agrees to accept the Collateral
- --------------------------
and to hold and dispose of the Collateral in accordance with and subject only to
the terms of this Agreement and the legal and equitable rights of the parties to
it. Pledgor hereby irrevocably appoints Pledgeholder as Pledgor's attorney-in-
fact to arrange for the transfer of the Collateral and to do and perform all
other actions that are requisite and necessary to be lawfully done in order to
affect the terms of this Agreement.
(d) Release of Collateral. The Collateral shall be released from this
---------------------
Agreement and returned to Pledgor upon receipt by Pledgeholder of written notice
from Pledgee that all of Pledgor's obligations under the Note have been
satisfied in full.
2. MATTERS PERTAINING TO THE COLLATERAL.
------------------------------------
(a) Voting and Consensual Rights. Pledgor retains the right to vote
----------------------------
the Stock and to exercise any other consensual rights pertaining to the Stock,
provided, however, so long as Pledgor is in "Default" as defined in Paragraph 3
of this Agreement, Pledgeholder shall vote the Stock and shall exercise any
consensual rights pertaining to the Stock as directed by Pledgee.
(b) Rights to Dividends and Distributions. Pledgor shall be entitled
-------------------------------------
to receive and retain any dividends or other payments or distributions with
respect to the Stock made to or due Pledgor as a shareholder, provided, however,
that:
(i) any and all dividends and distributions paid or payable other
than in cash in respect of the Stock, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
the Stock; and/or
(ii) any and all dividends and distributions paid or payable with
respect to the Stock in connection with a partial or total liquidation or
dissolution of the issuing corporation or in connection with a reduction of
capital, capital surplus or paid-in surplus of the issuing corporation; and/or
2
<PAGE>
(iii) any or all dividends or distributions paid with respect to,
payable or otherwise distributed in redemption of, or in exchange for, the
Stock;
shall be delivered to Pledgeholder to be added to and become a part of the
Collateral. Further provided, however, to the extent the foregoing dividends
and distributions exceed the amount of Pledgor's obligations and liabilities
under the Note and/or this Agreement, Pledgor shall be entitled to receive these
excess dividends and distributions.
Notwithstanding the foregoing, in the event and for so long as Pledgor
is in Default, Pledgeholder shall be paid any dividends or other payments or
distributions with respect to the Stock to be added to and become part of the
Collateral; provided, however, to the extent any amounts are due and payable to
Pledgee (whether by acceleration, maturity or otherwise) Pledgeholder shall
apply such payments against the outstanding balance of the Note.
(c) Stock Adjustments. In the event that, during the term of this
-----------------
Agreement, any stock dividend, reclassification, readjustment, or other change
is declared or made in the capital structure of the issuing corporation, all new
substituted and additional shares or other securities issued with respect to the
Stock by reason of any such change shall be delivered to Pledgeholder and held
by Pledgeholder under the terms of this Agreement in the same manner as the
Stock.
(d) Subscription Rights or Warrants. In the event that, during the term
-------------------------------
of this Agreement, subscription warrants or any other rights or options shall be
issued in connection with the Stock, such warrants, rights, and options shall be
immediately assigned by Pledgeholder to Pledgor, and if exercised by Pledgor,
all new shares or other securities so acquired by Pledgor shall be considered as
part of the Stock and shall be immediately assigned to Pledgeholder to be held
under the terms of this Agreement in the same manner as the Stock.
3. Default.
-------
At the option of Pledgee, and without necessity of presentment for
payment, demand, protest, notice of protest or notice of dishonor or any other
notice except as specifically provided herein, Pledgeholder may exercise any
remedy under this Agreement upon the happening of any of the following events of
default ("Default"):
(a) Default Under The Note. If any act or event of "default" on the
----------------------
part of Pledgor occurs under the Note without cure as specifically provided
therein; or
(b) Default Under This Agreement. If Pledgor defaults in the due
----------------------------
performance or observance of any representation or obligation under this
Agreement; provided, however, that if such obligation is monetary, Pledgor shall
be entitled to a grace period of ten (10) days following notice of such default
to cure said default, and further provided that if such obligation is
nonmonetary and is reasonably susceptible of being cured, Pledgor shall be
entitled to a grace
3
<PAGE>
period of thirty (30) days following written notice of default to cure said
default, and further provided that if such nonmonetary default is of such
character as to reasonably require more than thirty (30) days to cure, Pledgor
shall not be in default if Pledgor has diligently commenced to cure the default
within the thirty (30) day period and uses reasonable diligence thereafter in
curing the default. Notwithstanding the foregoing, if the event of default is
one under both Subparagraphs (a) and (b), the provisions of Subparagraph (a)
shall control in determining when and if the default is cured.
4. Remedies.
--------
Subject to Paragraph 3 of this Agreement, in the event Pledgor is in
Default without cure as hereinabove provided, Pledgee shall have the following
rights and remedies:
(a) Retention of Collateral by Pledgee. Choose to accept the
----------------------------------
Collateral (but only to the extent of unpaid obligations and liabilities under
the Note and/or this Agreement) after directing Pledgeholder to give notice of
such proposal to Pledgor and to any other person with a security interest in the
Collateral, as provided in Section 9505 of the California Commercial Code, and
--------------------------
such acceptance shall fully discharge the obligation of Pledgor providing
neither Pledgor, nor any other person with a security interest in the
Collateral, objects in writing to such proposal within twenty-one (21) days from
receipt of such notice.
(b) Sale of Collateral. Choose to sell the Collateral at a public or
------------------
private sale, in one or more sales or lots, at such price as Pledgeholder or
Pledgee may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, and the purchaser of any or all of the Collateral
so sold shall thereafter hold the same absolutely free from any claim,
encumbrance or right of any kind whatsoever. Provided, however, Pledgee shall
first direct Pledgeholder to give any notice or notification to Pledgor as
required by Section 9504 of the California Commercial Code by mailing such
--------------------------
notice, postage prepaid, to Pledgor's address as it appears within this
Agreement. Any other requirement of notice, demand or advertisement for sale
is, to the extent permitted by law, waived. Any sale hereunder may be conducted
by any auctioneer or any officer or agent of Pledgee. Any sale of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable. The
proceeds of any such sale shall be applied in the following order:
(i) Reasonable expenses of retaking, holding, preparing for sale,
selling, and the like and, to the extent provided for in this Agreement and
not prohibited by law, the reasonable attorneys' fees and legal expenses
incurred by Pledgeholder and/or Pledgee.
(ii) Satisfaction of the balance of unpaid principal and accrued
but unpaid interest and other amounts due under the Note.
4
<PAGE>
(iii) Satisfaction of any indebtedness secured by any
subordinate security interest in the Collateral if written notice and demand
therefore is received prior to distribution of the proceeds provided, however,
reasonable proof of such interest or interests is reasonably furnished to
Pledgeholder.
(c) Pledgee's Right to Purchase Collateral. Pledgeholder may, on behalf
--------------------------------------
of Pledgee, buy the Collateral at a public sale or private sale described above
in Subparagraph (b) pursuant to the conditions specified in Section 9504(3) of
the California Commercial Code.
--------------------------
(d) Pledgeholder's Right to Execute Documents. Pledgeholder shall have
-----------------------------------------
the right to execute any document or form, in its name or in the name of
Pledgor, which may be necessary or desirable in connection with the retention of
the Collateral as provided above in Subparagraph (a) or in the sale of the
Collateral as provided above in Subparagraph (b).
(e) Private Placement. In view of the fact that federal and state
-----------------
securities laws may impose certain restrictions on the method by which a sale of
the Collateral may be effected after an event of Default, and also upon the
persons or entities who may qualify or be eligible to purchase the Collateral,
Pledgor hereby agrees that upon the occurrence of an event of Default,
Pledgeholder, on behalf of Pledgee, may from time to time, if the Collateral is
not publicly traded on a nationally recognized stock exchange and/or is
considered a "restricted" security, attempt to sell all or any part of the
Collateral by a private placement, for cash, restricting the bidders and
prospective purchasers to a limited number who will represent and agree that
they are purchasing for investment for their own accounts only and not for
distribution, and who will otherwise meet state or federal securities law
requirements, including those pertaining to sales made pursuant to exemptions
from registration under the Securities Act of 1933 and/or registration or
qualification under other state or federal securities laws. The solicitation of
offers from four (4) or more investors, with the acceptance of the highest offer
therefrom by Pledgeholder, shall be deemed to be a commercially reasonable
method of disposition of the Collateral in this case.
5. No Impairment of Other Security.
-------------------------------
The execution and delivery of this Agreement shall in no manner
impair or affect any other security for the payment or performance of the Note
and no security taken hereafter as security for payment of any part or all of
the Note shall impair in any manner or affect this Agreement; all such present
and future additional security is to be considered as cumulative security. Any
future assignment or attempted assignment or transfer of the interest of Pledgor
in and to any of the Collateral shall not deprive Pledgeholder of the right to
sell or otherwise dispose of or utilize all of the Collateral as hereinabove
provided or necessitate the sale or disposition thereof.
5
<PAGE>
6. Pledgor's Representations, Warranties and Covenants.
---------------------------------------------------
(a) Pledgor represents and warrants to Pledgee as follows: (i) the
Stock is validly authorized, fully paid and nonassessable; (ii) the Stock was
issued without violation of any statutory or contractual preemptive rights, or
any rights of first refusal or other agreements; (iii) the Stock was issued to
Pledgor in compliance with federal and applicable state securities laws; (iv)
upon delivery to Pledgeholder as contemplated hereby, the Stock will be free of
any security interests, liens, pledges or encumbrances created by Pledgor
(except for the security interest created hereby), or any claims of third
parties of any nature whatsoever, charges, escrows, options, rights of first
refusal, or other agreements, arrangements, commitments or obligations, written
or oral, created by Pledgor or any other restrictions created by Pledgor
affecting the rights and other incidents of record or beneficial ownership of
the Stock.
(b) Pledgor represents and covenants that the terms and provisions
of this Agreement shall prevail over any agreement that Pledgor may have made
restricting in any manner the transferability of the Stock. Pledgor shall not
make any agreements restricting in any manner the transferability of the
Collateral, or otherwise affecting the Collateral.
(c) Pledgor represents and covenants that upon occurrence of an
event of Default hereunder, any sale of the Collateral made pursuant to the
power of sale contained herein shall, at the option of Pledgeholder, terminate
any agreement restricting sale or transferability of the Collateral, and the
purchaser at any such sale shall take the Collateral free and clear of any such
agreement .
(d) Pledgor shall do, make, procure, execute and deliver, at no
expense to Pledgee, all acts, things, writings and assurances as Pledgee may at
any time request to protect, assure or enforce his interests, rights and
remedies created by, provided in or emanating from this Agreement and any other
agreement made in connection herewith.
(e) Pledgor shall, at Pledgor's expense, take any steps necessary
to preserve Pledgee's rights in the Collateral against any claims of third
parties (except claims arising from any act or failure of act of Pledgeholder).
(f) Pledgor has made his own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, without
limitation, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
hereby agrees that Pledgeholder and Pledgee shall have no responsibility or
liability for informing Pledgor of any such changes or potential changes or for
taking any action or omitting to take any action with respect thereto.
(g) This Agreement, and the delivery to Pledgeholder of the Stock
creates a valid, perfected, and first priority security interest in the
Collateral in favor of Pledgeholder on behalf of
6
<PAGE>
Pledgee, and all actions necessary or desirable to such perfection have been
duly taken.
7. Matters Pertaining to Pledgeholder.
----------------------------------
(a) Pledgeholder shall not be personally liable for any act it may
do or omit to do under the Agreement while acting in good faith and in the
exercise of its best judgment, and any act done or omitted by Pledgeholder
pursuant to the advice of Pledgeholder's attorney shall be conclusive evidence
of such good faith. Except as expressly provided herein, Pledgeholder is
expressly authorized and directed to disregard any and all notices or warnings
given by any of the parties, or by any other person or corporation, excepting
only orders or process of court, and is hereby expressly authorized to comply
with and obey any and all orders, judgments or decrees of any court. If
Pledgeholder obeys or complies with any such order, judgment or decree of any
court, it shall not be liable to any of the parties or any other person, firm or
corporation by reason of such compliance, notwithstanding that any such order,
judgment or decree be subsequently reversed, modified, annulled, set aside or
vacated, or found to have been entered without jurisdiction.
(b) The parties expressly agree Pledgeholder has the absolute right
at Pledgeholder's election, if Pledgeholder considers it appropriate, to file an
action in interpleader requiring the parties to answer and litigate their claims
and rights among themselves, and Pledgeholder is authorized to deposit with the
clerk of the court all documents and funds held by it pursuant to this
Agreement. In the event such action is filed, the parties jointly and severally
agree to pay all costs, expenses and reasonable attorneys' fees which
Pledgeholder incurs in such interpleader action. Upon filing of such action
Pledgeholder shall thereupon be fully released and discharged from all
obligations to further perform any duties or obligations otherwise imposed by
the terms of this Agreement.
(c) Pledgeholder shall not be bound in any way by any other
agreement between the parties as to which Pledgeholder is not a party, whether
or not Pledgeholder has knowledge thereof, nor by any notice of a claim or
demand with respect to this Agreement or the Collateral. Pledgeholder shall have
no duties or responsibilities except as expressly set forth in this Agreement.
Pledgeholder may rely conclusively on any certificate, statement, request,
waiver, receipt, agreement or other instrument which Pledgeholder believes to be
genuine and to have been signed and presented by an appropriate person or
persons.
(d) The retention and distribution of the Collateral in accordance
with the terms and provisions of this Agreement shall fully and completely
release Pledgeholder from any obligation or liability assumed by Pledgeholder
hereunder as to the Collateral.
(e) Pledgeholder, while in possession of the Collateral prior to or
following the occurrence of an event of Default, as hereinabove provided, and
while acting in accordance with the terms of this Agreement or applicable law,
is not responsible for any fluctuations in value or delays in disposing of the
Collateral.
7
<PAGE>
(f) Pledgeholder shall not be liable in any respect for verifying
the identity, authority or rights of the parties executing or delivering or
purporting to execute and/or deliver this Agreement or any documents or papers
deposited hereunder. Pledgeholder shall not be liable for the loss of any rights
under any statute of limitations with respect to this Agreement or any documents
deposited with Pledgeholder.
(g) Notwithstanding anything herein to the contrary, Pledgeholder
shall have no duty with respect to the Collateral other than the duty to use
reasonable care in the custody and preservation of the Collateral if it is in
Pledgeholder's possession. Pledgeholder shall be under no obligation to take any
steps necessary to preserve rights in the Collateral against any other parties,
to sell the Collateral if it threatens to decline in value, or to exercise any
rights represented thereby, including voting or consensual rights; provided,
however, Pledgeholder may, at Pledgeholder's option, do so, and any and all
expenses incurred in connection therewith shall be for the sole account of
Pledgor.
(h) Pledgor and Pledgee agree to and each does hereby indemnify,
defend (with counsel acceptable to Pledgeholder) and hold Pledgeholder harmless
against any and all losses, damages, claims and expenses, including reasonable
attorneys' fees, that may be incurred by Pledgeholder by reason of his
compliance with the terms of this Agreement. If, as a result of any disagreement
between the parties and/or adverse demands and claims being made by any or all
of them upon Pledgeholder, Pledgeholder shall become involved in litigation,
including any interpleader brought by Pledgeholder as provided in this
Agreement, Pledgor and Pledgee each agree that they shall be jointly and
severally liable to Pledgeholder on demand for all costs, expenses and
attorneys' fees that Pledgeholder shall incur and/or be compelled to pay by
reason of such litigation.
8. Replacement of Pledgeholder.
---------------------------
In the event Pledgeholder is or becomes unwilling or unable to act
in such capacity for any reason, Pledgee shall appoint a successor. Pledgee (but
not Pledgor) shall have the right, after delivery of written notice signed by
Pledgee to Pledgeholder, to terminate Pledgeholder, and to name Pledgeholder's
successor.
9. Miscellaneous.
-------------
(a) It is acknowledged by each party that such party either had
separate and independent advice of counsel or the opportunity to avail himself
or itself of same. This Agreement was prepared by each party in conjunction with
counseling from such party's respective attorney or the opportunity to obtain
such counseling. In light of these facts it is acknowledged that no party shall
be construed to be solely responsible for the drafting of this Agreement, and
therefore any ambiguity shall not be construed against any party as the alleged
draftsman of it. Each party shall
8
<PAGE>
pay all costs and expenses incurred or to be incurred by such party in
negotiating and preparing this Agreement and in performing and complying with
all representations, warranties, covenants, agreements and conditions contained
in this Agreement to be performed or complied with by such party, including
legal fees.
(b) Each party agrees, without further consideration, to cooperate and
diligently perform any further acts, deeds and things and to execute and deliver
any documents that may be reasonably necessary to consummate, evidence, confirm
and/or carry out the intent and provisions of this Agreement, all without undue
delay or expense. Pledgor shall reimburse Pledgeholder and/or Pledgee, upon
demand, for any costs and expenses incurred by Pledgeholder or Pledgee in
connection with any breach or default of Pledgor under this Agreement, including
collection efforts by Pledgee under this Agreement, whether or not suit is
commenced or judgement is entered. Such costs shall include legal fees and
costs incurred for collection efforts, negotiation of a settlement, enforcement
of rights, or other use. Furthermore, should any party institute or should the
parties otherwise become a party to any action or proceeding to enforce or
interpret this Agreement or any provision hereof, or for damages by reason of
any alleged breach of this Agreement or any provision hereof, or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the prevailing party in any such
action or proceeding shall be entitled to receive from the nonprevailing party
as a cost of suit, and not as damages, all costs and expenses of prosecuting or
defending the action or proceeding, whichever the case may be, including,
without limitation, reasonable attorneys' and other professional fees incurred
by the prevailing party in connection with such action or proceeding. The term
"action or proceeding" shall mean and include actions, proceedings, suits,
arbitrations (if required or permitted under this Agreement or consented to by
the parties), appeals and other similar proceedings. The term "prevailing
party" shall mean the party who is determined to prevail by the Court after its
consideration of all damages and equities in the action or proceeding, whether
or not the action or proceeding proceeds to final judgment. This Agreement and
the rights of each party under this Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California applicable to agreements made and to be performed wholly within the
State of California, without regard to principals of conflicts of law.
Furthermore, in the event that litigation between the parties is necessary, such
litigation shall be filed in and heard solely before the state courts of
California with venue exclusively in Los Angeles County.
(c) The parties expressly acknowledge and agree that this Agreement :
(i) is the final, complete and exclusive statement of the parties' agreement
with respect to the subject matter hereof, (ii) supersedes any prior or
contemporaneous promises, assurances, guarantees, representations,
understandings, conduct, proposals, conditions, commitments, acts, course of
dealing, warranties, interpretations or terms of any kind, oral or written
(collectively "Prior Agreements"), and that any such Prior Agreements are of no
force or effect except as expressly set forth herein, and (iii) may not be
varied, supplemented or contradicted by evidence of such Prior Agreements or by
evidence of subsequent oral agreements. Any agreement hereafter made shall be
ineffective to modify, supplement or discharge the terms of this Agreement, in
whole or in part, unless such agreement is
9
<PAGE>
in writing and signed by the party against whom enforcement of the modification,
supplement or discharge is sought. By execution hereof, the parties specifically
disavow any desire or intention to create a "third party" beneficiary contract,
and specifically declare that no person or entity, save and except for the
parties and their permitted successors, and assigns, shall have any rights
hereunder nor any right of enforcement hereof. No breach of any agreement or
provision herein contained, or of any obligation under this Agreement, may be
waived, nor shall any extension of time for performance of any obligations or
acts be deemed an extension of time for performance of any other obligations or
acts contained herein, except by written instrument signed by the party to be
charged or as otherwise expressly authorized herein. No waiver of any breach of
any agreement or provision herein contained shall be deemed a waiver of any
preceding or succeeding breach thereof, or a waiver or relinquishment of any
other agreement or provision or right or power herein contained herein. The
remedies of each party under this Agreement are cumulative and shall not exclude
any other remedies to which such party may be lawfully entitled. If any term or
provision of this Agreement or the application thereof to any person or
circumstance shall, to any extent, be determined to be invalid, illegal or
unenforceable, then the remaining part of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid, illegal or unenforceable, which can be separated from the
invalid, illegal or unenforceable term(s) and provision(s), shall not be
affected thereby and shall continue in full force and effect to the fullest
extent provided by law, and the invalid, illegal or unenforceable term(s) and
provision(s) shall be construed as if they had never been incorporated into this
Agreement. It is expressly understood and agreed that time of performance is
strictly of the essence with respect to each and every term, condition,
obligation and provision hereof and that the failure to timely perform any of
the terms, conditions, obligations or provisions hereof by any party shall
constitute a material breach of and a non-curable (but waivable) default under
this Agreement by the party so failing to perform.
(d) Pledgor may not delegate his duties under this Agreement, in whole
or in part, without the prior written consent of Pledgee, which consent may be
withheld in Pledgee's sole and arbitrary discretion. Notwithstanding the
preceding sentence, no such delegation shall release Pledgor from any liability
or obligation under this Agreement without the written consent of Pledgee, which
consent may be withheld in Pledgee's sole and arbitrary discretion. Subject to
the foregoing, all of the representations, warranties, covenants, conditions and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of each party and such party's respective heirs, executors,
administrators, legal representatives, successors and/or assigns, whichever the
case may be.
(e) The headings used in this Agreement are for convenience and
reference purposes only, and shall not be used in construing or interpreting the
scope or intent of this Agreement or any provision hereof. References to this
Agreement shall include all amendments or renewals thereof. As used in this
Agreement, each gender shall be deemed to include each other gender, including
neutral genders or genders appropriate for entities, if applicable, and the
singular shall be deemed to include the plural, and vice versa, as the context
requires.
10
<PAGE>
(f) All notices, demands, requests, consents, approvals or other
communications (for the purposes of this Paragraph hereinafter collectively
called "Notices"), required or permitted to be given hereunder, or which are
given with respect to this Agreement, shall be in writing, and shall be given by
personal delivery, telegraph or by express mail, Federal Express, DHL or other
similar form of nationally recognized airborne/overnight delivery service (which
forms of Notice shall be deemed to have been given upon delivery), or by telex
or facsimile transmission (which forms of Notice shall be deemed delivered upon
confirmed transmission), or by mailing in the United States mail by registered
or certified mail, return receipt requested, postage prepaid (which forms of
Notice shall be deemed to have been given upon the third (3rd) business day
following the date mailed). Notices shall be addressed to the appropriate
party(s) as set forth on the signature page of this Agreement, or to such other
address as the receiving party shall have specified most recently by like
Notice, with a copy to the other parties hereto. Any Notice given to the estate
of a party shall be sufficient if addressed to the party as provided in this
Subparagraph.
WHEREFORE, the parties hereto have executed this Agreement on the dates and
at the places written below.
Executed at Monrovia Pledgor:
California on February
28, 1991
/s/ John R. Wolf
--------------------------
John R. Wolf
c/o Staar Surgical Company
1911 Walker Avenue
Monrovia, California 91016
Executed at Monrovia, Pledgeholder:
California on February
28, 1991 POLLET & ASSOCIATES
By: /s/ Andrew F. Pollet
-------------------------
Andrew F. Pollet
10850 Wilshire Blvd.
Suite 300
Los Angeles, CA 90024
SIGNATURES CONTINUED ON NEXT PAGE
11
<PAGE>
Executed at Monrovia, Pledgee:
California on February STAAR SURGICAL COMPANY, a Delaware
28, 1991 Corporation
By: /s/ John R. Wolf
-----------------------
John R. Wolf
Address: 1911 Walker Avenue
Monrovia, California 91016
12
<PAGE>
EXHIBIT "1"
-----------
PROMISSORY NOTE
---------------
(SECURED BY STOCK PLEDGE/SECURITY AGREEMENT)
------------------------------------------
$1,301,745.00 February 28, 1991
Monrovia, California
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, John R. Wolf, a married man (hereinafter "Maker"), hereby promises
-----
to pay to Staar Surgical Company, a Delaware corporation, or order (hereinafter
"Holder"), at the address hereinbelow designated on the signature page of this
------
Note, or such other place as Holder may designate by written notice to Maker,
the principal sum hereinbelow described (hereinafter the "Principal Amount"),
----------------
together with interest thereon, in the manner and at the times hereinbelow
provided and subject to the terms and conditions hereinbelow described.
1. Principal Amount.
----------------
The Principal Amount means the sum of One Million Three Hundred One
Thousand Seven Hundred Forty Five and No/100 Dollars ($1,301,745.00).
2. Interest.
--------
Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the date of this Note at the lesser of eight percent (8%) or
that fixed rate of interest (as of the date of this Note) which equals the
minimum applicable rate of simple interest (as of the date of this Note) which
will avoid the imputation of income to Maker. Interest shall be computed on the
basis of a three hundred sixty (360) day year and a thirty (30) day month.
3. Payment of Principal and Interest.
---------------------------------
Subject to Paragraph 7, the Principal Amount and accrued and unpaid
interest on the Principal Amount and all other indebtedness under this Note
shall be paid on February 28, 1994. Until such date, all interest on this Note
shall accrue.
4. Prepayments.
-----------
Maker shall have the right to prepay any portion of the Principal
Amount without prepayment penalty or premium or discount.
13
<PAGE>
5. Manner of Payments/Crediting of Payments.
----------------------------------------
Payments of any amount required hereunder shall be made solely in
lawful money of the United States, without deduction or offset, and shall be
credited first against accrued but unpaid interest, if any, and thereafter
against the unpaid balance of the Principal Amount.
6. Security.
--------
The payment of this Note is secured by a Stock Pledge/Security
Agreement (hereinafter the "Security Agreement") executed by Maker in favor of
------------------
Holder of even date herewith with respect to certain common stock of Holder
owned by Maker. The Security Agreement contains provisions for acceleration of
the maturity of this Note on the occurrence of certain described events.
7. Acceleration Upon Default.
-------------------------
At the option of Holder, all or any part of the indebtedness of Maker
hereunder shall immediately become due and payable, irrespective of any agreed
maturity, upon the happening of any of the following events of default ("Event
-----
of Default"):
- ----------
(a) Upon the occurrence of any event of default described under the
Security Agreement;
(c) If any of the following events constituting default occurs,
provided, however, that if any such event of default is reasonably susceptible
of being cured, Maker shall be entitled to a grace period of thirty (30) days
following written notice of such event of default to cure it, and further
provided, that if such event of default is of such character as to reasonably
require more than thirty (30) days to cure, Maker has promptly commenced to cure
said events of default within the thirty (30) day period and uses reasonable
diligence thereafter in curing such events of default, the thirty (30) day
period shall be reasonably extended (but not to exceed one hundred twenty days
(120)):
(i) If Maker shall breach any non-monetary condition or
obligation imposed on Maker pursuant to the terms of this Note;
(ii) If Maker shall make an assignment for the benefit of
creditors;
(iii) If a custodian, trustee, receiver, or agent is appointed
or takes possession of substantially all of the property of Maker;
14
<PAGE>
(iv) If Maker becomes insolvent as that terms is defined in
Section 101(26) of Title 11 of the United States Code;
(v) If Maker shall (A) file a petition with the Bankruptcy Court
under the Bankruptcy Code, or (B) otherwise file any petition or apply to
any tribunal for appointment of a custodian, trustee, receiver, or agent of
Maker, or commence any proceeding related to Maker under any bankruptcy or
reorganization statute, or under any arrangement, insolvency, readjustment
of debt, dissolution, or liquidation law of any jurisdiction, whether now
or hereafter in effect;
(vi) If any petition is filed against Maker under the Bankruptcy
Code and either (A) the Bankruptcy Code orders relief against Maker under
the chapter of Bankruptcy Code under which the petition was filed, or (B)
such petition is not dismissed by the Bankruptcy Court within thirty (30)
days of the date of filing;
(vii) If any petition or application of the type described in
Subparagraph (v)(A) above is filed against Maker, or any proceeding of the
type described in Subparagraphs (v)(A) or (v)(B) above is commenced, and
either (1) Maker, by any act, indicates his approval thereof, consent
thereto, or acquiescence therein, or (2) an order is entered appointing any
such custodian, trustee, receiver, or agent, adjudicating Maker bankrupt or
insolvent, or approving such petition or application in any such
proceeding, and any such order remains in effect for more than thirty (30)
days;
(viii) If any attachment, execution, or other writ is levied on
substantially all of the assets of Maker and remains in effect for more
than fifteen (15) days.
8. Collection Costs and Attorneys' Fees.
------------------------------------
(a) Maker agrees to pay Holder all costs and expenses, including
actual attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of the Note or any instrument securing payment of this
Note, including defending the priority of such instrument or as a result of
foreclosure against, or conducting a trustee sale thereunder.
(b) In the event any party institutes or should the parties otherwise
become a party to any action or proceeding in connection with the enforcement or
interpretation or collection of this Note or any instrument securing payment of
this Note, or for damages by reason of any alleged breach of this Note or any
provision hereof or any alleged breach of any instrument securing payment of
this Note or any provision thereof, or for a declaration of rights in connection
with this Note or any instrument securing payment of this Note, or for any other
relief, including
15
<PAGE>
equitable relief, in connection with this Note or any instrument securing
payment of this Note, the prevailing party in any such action or proceeding
shall be entitled to receive from the non-prevailing party all costs and
expenses including, without limitation, actual attorneys' and other fees
incurred by the prevailing party in connection with such action or proceeding.
9. Notice.
------
Any notice to Maker provided for in this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, addressed to Maker at the address set
forth below where this Note is executed, or to such other address as Maker may
designate by written notice to Holder. Any notice to Holder shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, to Holder at the address set forth
below where this Note is executed, or at such other address as may have been
designated by written notice to Maker. Mailed notices shall be deemed delivered
and received three (3) days after deposit in accordance with this provision in
the United States mail.
10. Usury Compliance.
----------------
All agreements between Maker and Holder are expressly limited, so that in
no event or contingency whatsoever, whether by reason of the consideration given
with respect to this Note, the acceleration of maturity of the unpaid Principal
Amount and interest thereon, or otherwise, shall the amount paid or agreed to be
paid to Holder for the use, forbearance, or detention of the indebtedness which
is the subject of this Note exceed the highest lawful rate permissible under the
applicable usury laws. If, under any circumstances whatsoever, fulfillment of
any provision of this Note or any agreement securing payment of this Note or
executed in connection with this Note after timely performance of such provision
is due, shall involve transcending the limit of validity prescribed by law which
a court of competent jurisdiction deems applicable, then the obligations to be
fulfilled shall be reduced to the limit of such validity, and if, under any
circumstances whatsoever, Holder shall ever receive as interest an amount that
exceeds the highest lawful rate, the amount that would be excessive interest
shall be applied to the reduction of the unpaid Principal Amount and/or late
charges under this Note and not to the payment of interest, or, if such
excessive interest exceeds the unpaid balance of the Principal Amount and/or
late charges under this Note, such excess shall be refunded to Maker.
11. General.
-------
(a) No delay or omission on the part of Holder in exercising any
rights under this Note or under any instrument given to secure this Note, on
default by Maker, including, without limitation, Holder's right to accelerate,
nor reinstatement of this Note by Holder after such exercise, shall operate as a
waiver of Maker's right to exercise such right or of any other right under
16
<PAGE>
this Note or the instruments given to secure this Note, for the same default or
any other default.
(b) Except for the provision of written notice hereinabove set forth,
Maker hereby waives presentment for payment, demand, protest, notice of protest
and notice of dishonor, and all other notices to which Maker might otherwise be
entitled, and further waives the right to require Holder to proceed against any
security for this Note before proceeding against Maker, and further waives all
defenses based on release of security or extension of time or other indulgence
given in respect to payment of this Note.
(c) Holder shall have the right to sell, assign, or otherwise
transfer, either in part or in its entirety, this Note, and any instrument
evidencing or securing the indebtedness of this Note (provided such instrument
is transferred as security for the portion of the Note which is conveyed),
without the consent of Maker. The assignment of this Note by Holder shall be
ineffective until actual notice of same is received by Maker. Maker shall have
no right to delegate its duties under this Note or any instrument securing this
Note without the written consent of Holder, which consent Holder shall not
unreasonably withhold, provided, however, no delegation of such duties or
obligations shall release Maker from any duty or obligation under this Note or
instrument securing payment of this Note.
(d) Subject to the foregoing Subparagraph (c), this Note and all of
the covenants, promises, and agreements contained in it shall be binding on and
inure to the benefit of the respective legal and personal representatives,
devises, heirs, successors, and assigns of Maker and Holder.
(e) This writing is intended by the parties to be an integrated and
final expression of this Note and also is intended to be a complete and
exclusive statement of the terms of that agreement. No course of prior dealing
between the parties, no usage of trade, and no parol or extrinsic evidence of
any nature shall be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Note except as
specifically provided herein.
(f) If any provision of this Note, or the application of it to any
party or circumstance, is held to be invalid, the remainder of this Note, and
the application of such provision to other parties or circumstances, shall not
be affected thereby, the provisions of this Note being severable in any such
instance.
(g) This Note shall be governed by, interpreted under and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into in the State of California, by residents of the State
of California, and intended to be performed entirely within the State of
California. Any action to enforce payment of this Note shall be filed and heard
solely in the Municipal or Superior Court of Los Angeles County, California.
17
<PAGE>
(h) Time is of the essence for each and every obligation under this
Note.
MAKER:
Exhibit Only--Do Not Sign
-------------------------
John R. Wolf
MAKER'S ADDRESS:
Mr. John R. Wolf
c/o Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
HOLDER'S ADDRESS:
Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
DO NOT DESTROY THIS NOTE; WHEN PAID, THIS NOTE
MUST BE SURRENDERED TO MAKER FOR CANCELLATION
18
<PAGE>
EXHIBIT "2"
PLEDGED STOCK
Corporation Name Certificate No. Number of Shares
1.
-------------------- -----------
2.
-------------------- -----------
3.
-------------------- -----------
19
<PAGE>
EXHIBIT "3"
ASSIGNMENT OF CORPORATE SHARES
(Without Certificate)
FOR VALUE RECEIVED, the undersigned hereby assigns to Pollet & Associates,
a California corporation, Pledgeholder, pursuant to that certain Stock
Pledge/Security Agreement, _____________________ shares of common stock of Staar
Surgical Company, a Delaware corporation, represented by certificate(s) number
__________________ standing in the undersigned's name on the books of said
corporation, and do hereby instruct and appoint the custodian of that
corporation's stock books to so transfer the said stock on the books of said
corporation.
Dated: February 28, 1991 EXHIBIT ONLY - DO NOT SIGN
--------------------------
John R. Wolf
SIGNATURE GUARANTEE:
- --------------------
20
<PAGE>
EXHIBIT 10.10
STAAR 1.5
PROMISSORY NOTE
---------------
(SECURED BY STOCK PLEDGE/SECURITY AGREEMENT)
-------------------------------------------
$119,185.00 February 28, 1991
Monrovia, California
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, WILLIAM C. HUDDLESTON, A MARRIED MAN (hereinafter "Maker"), hereby
-----
promises to pay to STAAR SURGICAL COMPANY, A DELAWARE CORPORATION, or order
(hereinafter "Holder"), at the address hereinbelow designated on the signature
------
page of this Note, or such other place as Holder may designate by written notice
to Maker, the principal sum hereinbelow described (hereinafter the "Principal
---------
Amount"), together with interest thereon, in the manner and at the times
- ------
hereinbelow provided and subject to the terms and conditions hereinbelow
described.
1. Principal Amount.
----------------
The Principal Amount means the sum of One Hundred Nineteen Thousand
One Hundred Eighty Five and No/100 Dollars ($119,185.00).
2. Interest.
--------
Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the date of this Note at the lesser of eight percent (8%) or
that fixed rate of interest (as of the date of this Note) which equals the
minimum applicable rate of simple interest (as of the date of this Note) which
will avoid the imputation of income to Maker. Interest shall be computed on the
basis of a three hundred sixty (360) day year and a thirty (30) day month.
3. Payment of Principal and Interest.
---------------------------------
Subject to Paragraph 7, the Principal Amount and accrued and unpaid
interest on the Principal Amount and all other indebtedness under this Note
shall be paid on February 28, 1994. Until such date, all interest on this Note
shall accrue.
4. Prepayments.
-----------
Maker shall have the right to prepay any portion of the Principal
Amount without prepayment penalty or premium or discount.
5. Manner of Payments/Crediting of Payments.
----------------------------------------
Payments of any amount required hereunder shall be made solely in
lawful money of the United States, without deduction or offset, and shall be
credited first against accrued but
<PAGE>
unpaid interest, if any, and thereafter against the unpaid balance of the
Principal Amount.
6. Security.
---------
The payment of this Note is secured by a Stock Pledge/Security
Agreement (hereinafter the "Security Agreement") executed by Maker in favor of
Holder of even date herewith with respect to certain common stock of Holder
owned by Maker. The Security Agreement contains provisions for acceleration of
the maturity of this Note on the occurrence of certain described events.
7. Acceleration Upon Default.
--------------------------
At the option of Holder, all or any part of the indebtedness of
Maker hereunder shall immediately become due and payable, irrespective of any
agreed maturity, upon the happening of any of the following events of default
("Event of Default"):
(a) Upon the occurrence of any event of default described under
the Security Agreement;
(c) If any of the following events constituting default occurs,
provided, however, that if any such event of default is reasonably susceptible
of being cured, Maker shall be entitled to a grace period of thirty (30) days
following written notice of such event of default to cure it, and further
provided, that if such event of default is of such character as to reasonably
require more than thirty (30) days to cure, Maker has promptly commenced to cure
said events of default within the thirty (30) day period and uses reasonable
diligence thereafter in curing such events of default, the thirty (30) day
period shall be reasonably extended (but not to exceed one hundred twenty days
(120)):
(i) If Maker shall breach any non-monetary condition or
obligation imposed on Maker pursuant to the terms of this Note;
(ii) If Maker shall make an assignment for the benefit of
creditors;
(iii) If a custodian, trustee, receiver, or agent is appointed
or takes possession of substantially all of the property of Maker;
(iv) If Maker becomes insolvent as that terms is defined in
Section 101(26) of Title 11 of the United States Code;
(v) If Maker shall (A) file a petition with the Bankruptcy
Court under the Bankruptcy Code, or (B) otherwise file any petition or
apply to any tribunal for appointment of a custodian, trustee, receiver, or
agent of Maker, or commence any proceeding related to Maker under any
bankruptcy or reorganization
<PAGE>
statute, or under any arrangement, insolvency, readjustment of debt,
dissolution, or liquidation law of any jurisdiction, whether now or
hereafter in effect;
(vi) If any petition is filed against Maker under the
Bankruptcy Code and either (A) the Bankruptcy Code orders relief against
Maker under the chapter of Bankruptcy Code under which the petition was
filed, or (B) such petition is not dismissed by the Bankruptcy Court within
thirty (30) days of the date of filing;
(vii) If any petition or application of the type described in
Subparagraph (v)(A) above is filed against Maker, or any proceeding of the
type described in Subparagraphs (v)(A) or (v)(B) above is commenced, and
either (1) Maker, by any act, indicates his approval thereof, consent
thereto, or acquiescence therein, or (2) an order is entered appointing any
such custodian, trustee, receiver, or agent, adjudicating Maker bankrupt or
insolvent, or approving such petition or application in any such
proceeding, and any such order remains in effect for more than thirty (30)
days;
(viii) If any attachment, execution, or other writ is levied on
substantially all of the assets of Maker and remains in effect for more
than fifteen (15) days.
8. Collection Costs and Attorneys' Fees.
------------------------------------
(a) Maker agrees to pay Holder all costs and expenses, including
actual attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of the Note or any instrument securing payment of this
Note, including defending the priority of such instrument or as a result of
foreclosure against, or conducting a trustee sale thereunder.
(b) In the event any party institutes or should the parties
otherwise become a party to any action or proceeding in connection with the
enforcement or interpretation or collection of this Note or any instrument
securing payment of this Note, or for damages by reason of any alleged breach of
this Note or any provision hereof or any alleged breach of any instrument
securing payment of this Note or any provision thereof, or for a declaration of
rights in connection with this Note or any instrument securing payment of this
Note, or for any other relief, including equitable relief, in connection with
this Note or any instrument securing payment of this Note, the prevailing party
in any such action or proceeding shall be entitled to receive from the non-
prevailing party all costs and expenses including, without limitation, actual
attorneys' and other fees incurred by the prevailing party in connection with
such action or proceeding.
9. Notice.
------
Any notice to Maker provided for in this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing
<PAGE>
such notice by first class or certified mail, return receipt requested,
addressed to Maker at the address set forth below where this Note is executed,
or to such other address as Maker may designate by written notice to Holder. Any
notice to Holder shall be given by personal delivery or by express mail, Federal
Express, DHL or similar airborne/overnight delivery service, or by mailing such
notice by first class or certified mail, return receipt requested, to Holder at
the address set forth below where this Note is executed, or at such other
address as may have been designated by written notice to Maker. Mailed notices
shall be deemed delivered and received three (3) days after deposit in
accordance with this provision in the United States mail.
10. Usury Compliance.
----------------
All agreements between Maker and Holder are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note or any agreement securing
payment of this Note or executed in connection with this Note after timely
performance of such provision is due, shall involve transcending the limit of
validity prescribed by law which a court of competent jurisdiction deems
applicable, then the obligations to be fulfilled shall be reduced to the limit
of such validity, and if, under any circumstances whatsoever, Holder shall ever
receive as interest an amount that exceeds the highest lawful rate, the amount
that would be excessive interest shall be applied to the reduction of the unpaid
Principal Amount and/or late charges under this Note and not to the payment of
interest, or, if such excessive interest exceeds the unpaid balance of the
Principal Amount and/or late charges under this Note, such excess shall be
refunded to Maker.
11. General.
-------
(a) No delay or omission on the part of Holder in exercising any
rights under this Note or under any instrument given to secure this Note, on
default by Maker, including, without limitation, Holder's right to accelerate,
nor reinstatement of this Note by Holder after such exercise, shall operate as a
waiver of Maker's right to exercise such right or of any other right under this
Note or the instruments given to secure this Note, for the same default or any
other default.
(b) Except for the provision of written notice hereinabove set
forth, Maker hereby waives presentment for payment, demand, protest, notice of
protest and notice of dishonor, and all other notices to which Maker might
otherwise be entitled, and further waives the right to require Holder to proceed
against any security for this Note before proceeding against Maker, and further
waives all defenses based on release of security or extension of time or other
indulgence given in respect to payment of this Note.
(c) Holder shall have the right to sell, assign, or otherwise
transfer, either in part or in its entirety, this Note, and any instrument
evidencing or securing the indebtedness of this Note
<PAGE>
(provided such instrument is transferred as security for the portion of the Note
which is conveyed), without the consent of Maker. The assignment of this Note by
Holder shall be ineffective until actual notice of same is received by Maker.
Maker shall have no right to delegate its duties under this Note or any
instrument securing this Note without the written consent of Holder, which
consent Holder shall not unreasonably withhold, provided, however, no delegation
of such duties or obligations shall release Maker from any duty or obligation
under this Note or instrument securing payment of this Note.
(d) Subject to the foregoing Subparagraph (c), this Note and all of
the covenants, promises, and agreements contained in it shall be binding on and
inure to the benefit of the respective legal and personal representatives,
devises, heirs, successors, and assigns of Maker and Holder.
(e) This writing is intended by the parties to be an integrated and
final expression of this Note and also is intended to be a complete and
exclusive statement of the terms of that agreement. No course of prior dealing
between the parties, no usage of trade, and no parol or extrinsic evidence of
any nature shall be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Note except as
specifically provided herein.
(f) If any provision of this Note, or the application of it to any
party or circumstance, is held to be invalid, the remainder of this Note, and
the application of such provision to other parties or circumstances, shall not
be affected thereby, the provisions of this Note being severable in any such
instance.
(g) This Note shall be governed by, interpreted under and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into in the State of California, by residents of the State
of California, and intended to be performed entirely within the State of
California. Any action to enforce payment of this Note shall be filed and heard
solely in the Municipal or Superior Court of Los Angeles County, California.
(h) Time is of the essence for each and every obligation under this
Note.
MAKER:
/s/ William C. Huddleston
-------------------------
William C. Huddleston
MAKER'S ADDRESS:
Mr. William C. Huddleston
c/o Staar Surgical Company
<PAGE>
1911 Walker Avenue
Monrovia, CA 91016
HOLDER'S ADDRESS:
Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
DO NOT DESTROY THIS NOTE; WHEN PAID, THIS NOTE
MUST BE SURRENDERED TO MAKER FOR CANCELLATION
<PAGE>
EXHIBIT 10.11
STAAR 1.3
STOCK PLEDGE/SECURITY AGREEMENT
-------------------------------
This STOCK PLEDGE/SECURITY AGREEMENT (hereinafter "Agreement") is made and
entered into this 28th day of February, 1991, by and between William C.
Huddleston, a married man ("Pledgor"), Pollet & Associates, a California
corporation ("Pledgeholder"), and Staar Surgical Company, a Delaware corporation
("Pledgee") with reference to the following facts:
RECITALS
--------
WHEREAS, Pledgor has borrowed the sum of One Nineteen Thousand One Hundred
Eighty Five Dollars ($119,185.00) from Pledgee pursuant to the terms of a
Promissory Note attached hereto as Exhibit "1" and incorporated herein by this
reference ("Note"), and
WHEREAS, Pledgor desires to pledge his interest in certain common stock,
pursuant to the terms of this Agreement, for the purpose of securing Pledgor's
indebtedness to Pledgee for the unpaid balance of the Note.
NOW, THEREFORE, in consideration of mutual covenants and promises contained
herein, and for valuable consideration, the receipt and sufficiency which are
hereby mutually acknowledged and confessed, the parties to this Agreement
(hereinafter collectively "parties" and individually "party") agree as follows:
AGREEMENT
---------
1. Pledge of Stock and Proceeds.
----------------------------
(a) Pledge. As collateral security for the payment and/or performance
------
of all of Pledgor's presently existing or hereinafter arising obligations and
liabilities to Pledgee under the Note, Pledgor agrees to deliver, pledge and
grant to Pledgeholder, concurrently with the execution of this Agreement, a
continuing security interest in the following:
(i) the shares of common stock which are set forth on Exhibit
"2" to this Agreement ("Stock").
(ii) the proceeds of the Stock including, without limitation,
any and all dividends, cash, instruments and other property from time-to-time
received, receivable, or otherwise distributed in respect of or in exchange for
any of the Stock ("Proceeds"). The Stock and the Proceeds shall hereinafter be
collectively referred to as the "Collateral").
(b) Delivery of Stock to Pledgeholder. Pledgor agrees to deliver to
---------------------------------
Pledgeholder, upon execution of this Agreement, the certificate(s) representing
the Stock. Upon
1
<PAGE>
execution of this Agreement, Pledgor shall deliver to Pledgeholder an Assignment
of Corporate Shares in the form of Exhibit "3" attached hereto and incorporated
herein by this reference ("Stock Assignment"), signed by Pledgor, in blank, such
Stock Assignment to be used by Pledgeholder in accordance with the terms of this
Agreement.
(c) Notification of Payments Under Note. Pledgee agrees to notify
-----------------------------------
Pledgeholder of all amounts collected in accordance with the terms and
conditions of the Note, including final satisfaction of the Note, at which time
Pledgee shall direct Pledgeholder to return the Collateral to Pledgor.
(c) Pledgeholder's Acceptance of Collateral and Appointment as
----------------------------------------------------------
Pledgor's Attorney-In-Fact. Pledgeholder hereby agrees to accept the Collateral
- --------------------------
and to hold and dispose of the Collateral in accordance with and subject only to
the terms of this Agreement and the legal and equitable rights of the parties to
it. Pledgor hereby irrevocably appoints Pledgeholder as Pledgor's attorney-in-
fact to arrange for the transfer of the Collateral and to do and perform all
other actions that are requisite and necessary to be lawfully done in order to
affect the terms of this Agreement.
(d) Release of Collateral. The Collateral shall be released from this
---------------------
Agreement and returned to Pledgor upon receipt by Pledgeholder of written notice
from Pledgee that all of Pledgor's obligations under the Note have been
satisfied in full.
2. Matters Pertaining to the Collateral.
------------------------------------
(a) Voting and Consensual Rights. Pledgor retains the right to vote
----------------------------
the Stock and to exercise any other consensual rights pertaining to the Stock,
provided, however, so long as Pledgor is in "Default" as defined in Paragraph 3
of this Agreement, Pledgeholder shall vote the Stock and shall exercise any
consensual rights pertaining to the Stock as directed by Pledgee.
(b) Rights to Dividends and Distributions. Pledgor shall be entitled
-------------------------------------
to receive and retain any dividends or other payments or distributions with
respect to the Stock made to or due Pledgor as a shareholder, provided, however,
that:
(i) any and all dividends and distributions paid or payable other
than in cash in respect of the Stock, and instruments and other property
received, receivable or otherwise distributed in respect of, or in exchange for,
the Stock; and/or
(ii) any and all dividends and distributions paid or payable with
respect to the Stock in connection with a partial or total liquidation or
dissolution of the issuing corporation or in connection with a reduction of
capital, capital surplus or paid-in surplus of the issuing corporation; and/or
(iii) any or all dividends or distributions paid with respect to,
payable or
2
<PAGE>
otherwise distributed in redemption of, or in exchange for, the Stock;
shall be delivered to Pledgeholder to be added to and become a part of the
Collateral. Further provided, however, to the extent the foregoing dividends
and distributions exceed the amount of Pledgor's obligations and liabilities
under the Note and/or this Agreement, Pledgor shall be entitled to receive these
excess dividends and distributions.
Notwithstanding the foregoing, in the event and for so long as Pledgor
is in Default, Pledgeholder shall be paid any dividends or other payments or
distributions with respect to the Stock to be added to and become part of the
Collateral; provided, however, to the extent any amounts are due and payable to
Pledgee (whether by acceleration, maturity or otherwise) Pledgeholder shall
apply such payments against the outstanding balance of the Note.
(c) Stock Adjustments. In the event that, during the term of this
-----------------
Agreement, any stock dividend, reclassification, readjustment, or other change
is declared or made in the capital structure of the issuing corporation, all new
substituted and additional shares or other securities issued with respect to the
Stock by reason of any such change shall be delivered to Pledgeholder and held
by Pledgeholder under the terms of this Agreement in the same manner as the
Stock.
(d) Subscription Rights or Warrants. In the event that, during the
-------------------------------
term of this Agreement, subscription warrants or any other rights or options
shall be issued in connection with the Stock, such warrants, rights, and options
shall be immediately assigned by Pledgeholder to Pledgor, and if exercised by
Pledgor, all new shares or other securities so acquired by Pledgor shall be
considered as part of the Stock and shall be immediately assigned to
Pledgeholder to be held under the terms of this Agreement in the same manner as
the Stock.
3. Default.
-------
At the option of Pledgee, and without necessity of presentment for
payment, demand, protest, notice of protest or notice of dishonor or any other
notice except as specifically provided herein, Pledgeholder may exercise any
remedy under this Agreement upon the happening of any of the following events of
default ("Default"):
(a) Default Under The Note. If any act or event of "default" on the
----------------------
part of Pledgor occurs under the Note without cure as specifically provided
therein; or
(b) Default Under This Agreement. If Pledgor defaults in the due
----------------------------
performance or observance of any representation or obligation under this
Agreement; provided, however, that if such obligation is monetary, Pledgor shall
be entitled to a grace period of ten (10) days following notice of such default
to cure said default, and further provided that if such obligation is
nonmonetary and is reasonably susceptible of being cured, Pledgor shall be
entitled to a grace period of thirty (30) days following written notice of
default to cure said default, and further
3
<PAGE>
provided that if such nonmonetary default is of such character as to reasonably
require more than thirty (30) days to cure, Pledgor shall not be in default if
Pledgor has diligently commenced to cure the default within the thirty (30) day
period and uses reasonable diligence thereafter in curing the default.
Notwithstanding the foregoing, if the event of default is one under both
Subparagraphs (a) and (b), the provisions of Subparagraph (a) shall control in
determining when and if the default is cured.
4. Remedies.
--------
Subject to Paragraph 3 of this Agreement, in the event Pledgor is in
Default without cure as hereinabove provided, Pledgee shall have the following
rights and remedies:
(a) Retention of Collateral by Pledgee. Choose to accept the
----------------------------------
Collateral (but only to the extent of unpaid obligations and liabilities under
the Note and/or this Agreement) after directing Pledgeholder to give notice of
such proposal to Pledgor and to any other person with a security interest in the
Collateral, as provided in Section 9505 of the California Commercial Code, and
--------------------------
such acceptance shall fully discharge the obligation of Pledgor providing
neither Pledgor, nor any other person with a security interest in the
Collateral, objects in writing to such proposal within twenty-one (21) days from
receipt of such notice.
(b) Sale of Collateral. Choose to sell the Collateral at a public or
------------------
private sale, in one or more sales or lots, at such price as Pledgeholder or
Pledgee may deem best, and for cash or on credit or for future delivery, without
assumption of any credit risk, and the purchaser of any or all of the Collateral
so sold shall thereafter hold the same absolutely free from any claim,
encumbrance or right of any kind whatsoever. Provided, however, Pledgee shall
first direct Pledgeholder to give any notice or notification to Pledgor as
required by Section 9504 of the California Commercial Code by mailing such
--------------------------
notice, postage prepaid, to Pledgor's address as it appears within this
Agreement. Any other requirement of notice, demand or advertisement for sale
is, to the extent permitted by law, waived. Any sale hereunder may be conducted
by any auctioneer or any officer or agent of Pledgee. Any sale of the
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially reasonable. The
proceeds of any such sale shall be applied in the following order:
(i) Reasonable expenses of retaking, holding, preparing for
sale, selling, and the like and, to the extent provided for in this
Agreement and not prohibited by law, the reasonable attorneys' fees and
legal expenses incurred by Pledgeholder and/or Pledgee.
(ii) Satisfaction of the balance of unpaid principal and accrued
but unpaid interest and other amounts due under the Note.
4
<PAGE>
(iii) Satisfaction of any indebtedness secured by any
subordinate security interest in the Collateral if written notice and
demand therefore is received prior to distribution of the proceeds
provided, however, reasonable proof of such interest or interests is
reasonably furnished to Pledgeholder.
(c) Pledgee's Right to Purchase Collateral. Pledgeholder may, on
--------------------------------------
behalf of Pledgee, buy the Collateral at a public sale or private sale described
above in Subparagraph (b) pursuant to the conditions specified in Section
9504(3) of the California Commercial Code.
(d) Pledgeholder's Right to Execute Documents. Pledgeholder shall
-----------------------------------------
have the right to execute any document or form, in its name or in the name of
Pledgor, which may be necessary or desirable in connection with the retention of
the Collateral as provided above in Subparagraph (a) or in the sale of the
Collateral as provided above in Subparagraph (b).
(e) Private Placement. In view of the fact that federal and state
-----------------
securities laws may impose certain restrictions on the method by which a sale of
the Collateral may be effected after an event of Default, and also upon the
persons or entities who may qualify or be eligible to purchase the Collateral,
Pledgor hereby agrees that upon the occurrence of an event of Default,
Pledgeholder, on behalf of Pledgee, may from time to time, if the Collateral is
not publicly traded on a nationally recognized stock exchange and/or is
considered a "restricted" security, attempt to sell all or any part of the
Collateral by a private placement, for cash, restricting the bidders and
prospective purchasers to a limited number who will represent and agree that
they are purchasing for investment for their own accounts only and not for
distribution, and who will otherwise meet state or federal securities law
requirements, including those pertaining to sales made pursuant to exemptions
from registration under the Securities Act of 1933 and/or registration or
qualification under other state or federal securities laws. The solicitation of
offers from four (4) or more investors, with the acceptance of the highest offer
therefrom by Pledgeholder, shall be deemed to be a commercially reasonable
method of disposition of the Collateral in this case.
5. No Impairment of Other Security.
-------------------------------
The execution and delivery of this Agreement shall in no manner
impair or affect any other security for the payment or performance of the Note
and no security taken hereafter as security for payment of any part or all of
the Note shall impair in any manner or affect this Agreement; all such present
and future additional security is to be considered as cumulative security. Any
future assignment or attempted assignment or transfer of the interest of Pledgor
in and to any of the Collateral shall not deprive Pledgeholder of the right to
sell or otherwise dispose of or utilize all of the Collateral as hereinabove
provided or necessitate the sale or disposition thereof.
6. Pledgor's Representations, Warranties and Covenants.
---------------------------------------------------
5
<PAGE>
(a) Pledgor represents and warrants to Pledgee as follows: (i) the
Stock is validly authorized, fully paid and nonassessable; (ii) the Stock was
issued without violation of any statutory or contractual preemptive rights, or
any rights of first refusal or other agreements; (iii) the Stock was issued to
Pledgor in compliance with federal and applicable state securities laws; (iv)
upon delivery to Pledgeholder as contemplated hereby, the Stock will be free of
any security interests, liens, pledges or encumbrances created by Pledgor
(except for the security interest created hereby), or any claims of third
parties of any nature whatsoever, charges, escrows, options, rights of first
refusal, or other agreements, arrangements, commitments or obligations, written
or oral, created by Pledgor or any other restrictions created by Pledgor
affecting the rights and other incidents of record or beneficial ownership of
the Stock.
(b) Pledgor represents and covenants that the terms and provisions
of this Agreement shall prevail over any agreement that Pledgor may have made
restricting in any manner the transferability of the Stock. Pledgor shall not
make any agreements restricting in any manner the transferability of the
Collateral, or otherwise affecting the Collateral.
(c) Pledgor represents and covenants that upon occurrence of an
event of Default hereunder, any sale of the Collateral made pursuant to the
power of sale contained herein shall, at the option of Pledgeholder, terminate
any agreement restricting sale or transferability of the Collateral, and the
purchaser at any such sale shall take the Collateral free and clear of any such
agreement.
(d) Pledgor shall do, make, procure, execute and deliver, at no
expense to Pledgee, all acts, things, writings and assurances as Pledgee may at
any time request to protect, assure or enforce his interests, rights and
remedies created by, provided in or emanating from this Agreement and any other
agreement made in connection herewith.
(e) Pledgor shall, at Pledgor's expense, take any steps necessary
to preserve Pledgee's rights in the Collateral against any claims of third
parties (except claims arising from any act or failure of act of Pledgeholder).
(f) Pledgor has made his own arrangements for keeping informed of
changes or potential changes affecting the Collateral (including, without
limitation, rights to convert, rights to subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and Pledgor
hereby agrees that Pledgeholder and Pledgee shall have no responsibility or
liability for informing Pledgor of any such changes or potential changes or for
taking any action or omitting to take any action with respect thereto.
(g) This Agreement, and the delivery to Pledgeholder of the Stock
creates a valid, perfected, and first priority security interest in the
Collateral in favor of Pledgeholder on behalf of Pledgee, and all actions
necessary or desirable to such perfection have been duly taken.
6
<PAGE>
7. Matters Pertaining to Pledgeholder.
----------------------------------
(a) Pledgeholder shall not be personally liable for any act it may
do or omit to do under the Agreement while acting in good faith and in the
exercise of its best judgment, and any act done or omitted by Pledgeholder
pursuant to the advice of Pledgeholder's attorney shall be conclusive evidence
of such good faith. Except as expressly provided herein, Pledgeholder is
expressly authorized and directed to disregard any and all notices or warnings
given by any of the parties, or by any other person or corporation, excepting
only orders or process of court, and is hereby expressly authorized to comply
with and obey any and all orders, judgments or decrees of any court. If
Pledgeholder obeys or complies with any such order, judgment or decree of any
court, it shall not be liable to any of the parties or any other person, firm or
corporation by reason of such compliance, notwithstanding that any such order,
judgment or decree be subsequently reversed, modified, annulled, set aside or
vacated, or found to have been entered without jurisdiction.
(b) The parties expressly agree Pledgeholder has the absolute right
at Pledgeholder's election, if Pledgeholder considers it appropriate, to file an
action in interpleader requiring the parties to answer and litigate their claims
and rights among themselves, and Pledgeholder is authorized to deposit with the
clerk of the court all documents and funds held by it pursuant to this
Agreement. In the event such action is filed, the parties jointly and severally
agree to pay all costs, expenses and reasonable attorneys' fees which
Pledgeholder incurs in such interpleader action. Upon filing of such action
Pledgeholder shall thereupon be fully released and discharged from all
obligations to further perform any duties or obligations otherwise imposed by
the terms of this Agreement.
(c) Pledgeholder shall not be bound in any way by any other
agreement between the parties as to which Pledgeholder is not a party, whether
or not Pledgeholder has knowledge thereof, nor by any notice of a claim or
demand with respect to this Agreement or the Collateral. Pledgeholder shall have
no duties or responsibilities except as expressly set forth in this Agreement.
Pledgeholder may rely conclusively on any certificate, statement, request,
waiver, receipt, agreement or other instrument which Pledgeholder believes to be
genuine and to have been signed and presented by an appropriate person or
persons.
(d) The retention and distribution of the Collateral in accordance
with the terms and provisions of this Agreement shall fully and completely
release Pledgeholder from any obligation or liability assumed by Pledgeholder
hereunder as to the Collateral.
(e) Pledgeholder, while in possession of the Collateral prior to or
following the occurrence of an event of Default, as hereinabove provided, and
while acting in accordance with the terms of this Agreement or applicable law,
is not responsible for any fluctuations in value or delays in disposing of the
Collateral.
7
<PAGE>
(f) Pledgeholder shall not be liable in any respect for verifying
the identity, authority or rights of the parties executing or delivering or
purporting to execute and/or deliver this Agreement or any documents or papers
deposited hereunder. Pledgeholder shall not be liable for the loss of any rights
under any statute of limitations with respect to this Agreement or any documents
deposited with Pledgeholder.
(g) Notwithstanding anything herein to the contrary, Pledgeholder
shall have no duty with respect to the Collateral other than the duty to use
reasonable care in the custody and preservation of the Collateral if it is in
Pledgeholder's possession. Pledgeholder shall be under no obligation to take any
steps necessary to preserve rights in the Collateral against any other parties,
to sell the Collateral if it threatens to decline in value, or to exercise any
rights represented thereby, including voting or consensual rights; provided,
however, Pledgeholder may, at Pledgeholder's option, do so, and any and all
expenses incurred in connection therewith shall be for the sole account of
Pledgor.
(h) Pledgor and Pledgee agree to and each does hereby indemnify,
defend (with counsel acceptable to Pledgeholder) and hold Pledgeholder harmless
against any and all losses, damages, claims and expenses, including reasonable
attorneys' fees, that may be incurred by Pledgeholder by reason of his
compliance with the terms of this Agreement. If, as a result of any disagreement
between the parties and/or adverse demands and claims being made by any or all
of them upon Pledgeholder, Pledgeholder shall become involved in litigation,
including any interpleader brought by Pledgeholder as provided in this
Agreement, Pledgor and Pledgee each agree that they shall be jointly and
severally liable to Pledgeholder on demand for all costs, expenses and
attorneys' fees that Pledgeholder shall incur and/or be compelled to pay by
reason of such litigation.
8. Replacement of Pledgeholder.
---------------------------
In the event Pledgeholder is or becomes unwilling or unable to act
in such capacity for any reason, Pledgee shall appoint a successor. Pledgee (but
not Pledgor) shall have the right, after delivery of written notice signed by
Pledgee to Pledgeholder, to terminate Pledgeholder, and to name Pledgeholder's
successor.
9. Miscellaneous.
-------------
(a) It is acknowledged by each party that such party either had separate
and independent advice of counsel or the opportunity to avail himself or itself
of same. This Agreement was prepared by each party in conjunction with
counseling from such party's respective attorney or the opportunity to obtain
such counseling. In light of these facts it is acknowledged that no party shall
be construed to be solely responsible for the drafting of this Agreement, and
therefore any ambiguity shall not be construed against any party as the alleged
draftsman of it. Each party shall pay all costs and expenses incurred or to be
incurred by such party in negotiating and preparing this
8
<PAGE>
Agreement and in performing and complying with all representations, warranties,
covenants, agreements and conditions contained in this Agreement to be performed
or complied with by such party, including legal fees.
(b) Each party agrees, without further consideration, to cooperate and
diligently perform any further acts, deeds and things and to execute and deliver
any documents that may be reasonably necessary to consummate, evidence, confirm
and/or carry out the intent and provisions of this Agreement, all without undue
delay or expense. Pledgor shall reimburse Pledgeholder and/or Pledgee, upon
demand, for any costs and expenses incurred by Pledgeholder or Pledgee in
connection with any breach or default of Pledgor under this Agreement, including
collection efforts by Pledgee under this Agreement, whether or not suit is
commenced or judgement is entered. Such costs shall include legal fees and
costs incurred for collection efforts, negotiation of a settlement, enforcement
of rights, or other use. Furthermore, should any party institute or should the
parties otherwise become a party to any action or proceeding to enforce or
interpret this Agreement or any provision hereof, or for damages by reason of
any alleged breach of this Agreement or any provision hereof, or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the prevailing party in any such
action or proceeding shall be entitled to receive from the nonprevailing party
as a cost of suit, and not as damages, all costs and expenses of prosecuting or
defending the action or proceeding, whichever the case may be, including,
without limitation, reasonable attorneys' and other professional fees incurred
by the prevailing party in connection with such action or proceeding. The term
"action or proceeding" shall mean and include actions, proceedings, suits,
arbitrations (if required or permitted under this Agreement or consented to by
the parties), appeals and other similar proceedings. The term "prevailing
party" shall mean the party who is determined to prevail by the Court after its
consideration of all damages and equities in the action or proceeding, whether
or not the action or proceeding proceeds to final judgment. This Agreement and
the rights of each party under this Agreement shall be governed by, interpreted
under, and construed and enforced in accordance with the laws of the State of
California applicable to agreements made and to be performed wholly within the
State of California, without regard to principals of conflicts of law.
Furthermore, in the event that litigation between the parties is necessary, such
litigation shall be filed in and heard solely before the state courts of
California with venue exclusively in Los Angeles County.
(c) The parties expressly acknowledge and agree that this Agreement :
(i) is the final, complete and exclusive statement of the parties' agreement
with respect to the subject matter hereof, (ii) supersedes any prior or
contemporaneous promises, assurances, guarantees, representations,
understandings, conduct, proposals, conditions, commitments, acts, course of
dealing, warranties, interpretations or terms of any kind, oral or written
(collectively "Prior Agreements"), and that any such Prior Agreements are of no
force or effect except as expressly set forth herein, and (iii) may not be
varied, supplemented or contradicted by evidence of such Prior Agreements or by
evidence of subsequent oral agreements. Any agreement hereafter made shall be
ineffective to modify, supplement or discharge the terms of this Agreement, in
whole or in part, unless such agreement is in writing and signed by the party
against whom enforcement of the modification, supplement or
9
<PAGE>
discharge is sought. By execution hereof, the parties specifically disavow any
desire or intention to create a "third party" beneficiary contract, and
specifically declare that no person or entity, save and except for the parties
and their permitted successors, and assigns, shall have any rights hereunder nor
any right of enforcement hereof. No breach of any agreement or provision herein
contained, or of any obligation under this Agreement, may be waived, nor shall
any extension of time for performance of any obligations or acts be deemed an
extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or as
otherwise expressly authorized herein. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or a waiver or relinquishment of any other agreement
or provision or right or power herein contained herein. The remedies of each
party under this Agreement are cumulative and shall not exclude any other
remedies to which such party may be lawfully entitled. If any term or provision
of this Agreement or the application thereof to any person or circumstance
shall, to any extent, be determined to be invalid, illegal or unenforceable,
then the remaining part of this Agreement, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, which can be separated from the invalid,
illegal or unenforceable term(s) and provision(s), shall not be affected thereby
and shall continue in full force and effect to the fullest extent provided by
law, and the invalid, illegal or unenforceable term(s) and provision(s) shall be
construed as if they had never been incorporated into this Agreement. It is
expressly understood and agreed that time of performance is strictly of the
essence with respect to each and every term, condition, obligation and provision
hereof and that the failure to timely perform any of the terms, conditions,
obligations or provisions hereof by any party shall constitute a material breach
of and a non-curable (but waivable) default under this Agreement by the party so
failing to perform.
(d) Pledgor may not delegate his duties under this Agreement, in whole
or in part, without the prior written consent of Pledgee, which consent may be
withheld in Pledgee's sole and arbitrary discretion. Notwithstanding the
preceding sentence, no such delegation shall release Pledgor from any liability
or obligation under this Agreement without the written consent of Pledgee, which
consent may be withheld in Pledgee's sole and arbitrary discretion. Subject to
the foregoing, all of the representations, warranties, covenants, conditions and
provisions of this Agreement shall be binding upon and shall inure to the
benefit of each party and such party's respective heirs, executors,
administrators, legal representatives, successors and/or assigns, whichever the
case may be.
(e) The headings used in this Agreement are for convenience and reference
purposes only, and shall not be used in construing or interpreting the scope or
intent of this Agreement or any provision hereof. References to this Agreement
shall include all amendments or renewals thereof. As used in this Agreement,
each gender shall be deemed to include each other gender, including neutral
genders or genders appropriate for entities, if applicable, and the singular
shall be deemed to include the plural, and vice versa, as the context requires.
10
<PAGE>
(f) All notices, demands, requests, consents, approvals or other
communications (for the purposes of this Paragraph hereinafter collectively
called "Notices"), required or permitted to be given hereunder, or which are
given with respect to this Agreement, shall be in writing, and shall be given by
personal delivery, telegraph or by express mail, Federal Express, DHL or other
similar form of nationally recognized airborne/overnight delivery service (which
forms of Notice shall be deemed to have been given upon delivery), or by telex
or facsimile transmission (which forms of Notice shall be deemed delivered upon
confirmed transmission), or by mailing in the United States mail by registered
or certified mail, return receipt requested, postage prepaid (which forms of
Notice shall be deemed to have been given upon the third (3rd) business day
following the date mailed). Notices shall be addressed to the appropriate
party(s) as set forth on the signature page of this Agreement, or to such other
address as the receiving party shall have specified most recently by like
Notice, with a copy to the other parties hereto. Any Notice given to the estate
of a party shall be sufficient if addressed to the party as provided in this
Subparagraph.
WHEREFORE, the parties hereto have executed this Agreement on the dates
and at the places written below.
Executed at Monrovia Pledgor:
California on February
28, 1991
/s/ William C. Huddleston
--------------------------
William C. Huddleston
Address: c/o Staar Surgical Company
1911 Walker Avenue
Monrovia, California 91016
Executed at Monrovia, Pledgeholder:
California on February
28, 1991 POLLET & ASSOCIATES
By: /s/ Andrew F. Pollet
----------------------
Andrew F. Pollet
10850 Wilshire Blvd.
Suite 300
Los Angeles, CA 90024
SIGNATURES CONTINUED ON NEXT PAGE
11
<PAGE>
Executed at Monrovia, Pledgee:
California on February STAAR SURGICAL COMPANY, a Delaware
28, 1991 Corporation
By: /s/ John R. Wolf
------------------------
John R. Wolf
Address: 1911 Walker Avenue
Monrovia, California 91016
12
<PAGE>
EXHIBIT "1"
-----------
PROMISSORY NOTE
---------------
(SECURED BY STOCK PLEDGE/SECURITY AGREEMENT)
--------------------------------------------
$119,185.00 February 28, 1991
Monrovia, California
FOR VALUE RECEIVED, the receipt and sufficiency of which is hereby
acknowledged, William C. Huddleston, a married man (hereinafter "Maker"), hereby
-----
promises to pay to Staar Surgical Company, a Delaware corporation, or order
(hereinafter "Holder"), at the address hereinbelow designated on the signature
------
page of this Note, or such other place as Holder may designate by written notice
to Maker, the principal sum hereinbelow described (hereinafter the "Principal
---------
Amount"), together with interest thereon, in the manner and at the times
- ------
hereinbelow provided and subject to the terms and conditions hereinbelow
described.
1. Principal Amount.
----------------
The Principal Amount means the sum of One Ninteen Thousand One
Hundred Eighty Five and No/100 Dollars ($119,185.00).
2. Interest.
--------
Interest on the Principal Amount from time-to-time remaining unpaid
shall accrue from the date of this Note at the lesser of eight percent (8%) or
that fixed rate of interest (as of the date of this Note) which equals the
minimum applicable rate of simple interest (as of the date of this Note) which
will avoid the imputation of income to Maker. Interest shall be computed on the
basis of a three hundred sixty (360) day year and a thirty (30) day month.
3. Payment of Principal and Interest.
---------------------------------
Subject to Paragraph 7, the Principal Amount and accrued and unpaid
interest on the Principal Amount and all other indebtedness under this Note
shall be paid on February 28, 1994. Until such date, all interest on this Note
shall accrue.
4. Prepayments.
-----------
Maker shall have the right to prepay any portion of the Principal
Amount without prepayment penalty or premium or discount.
13
<PAGE>
5. Manner of Payments/Crediting of Payments.
----------------------------------------
Payments of any amount required hereunder shall be made solely in
lawful money of the United States, without deduction or offset, and shall be
credited first against accrued but unpaid interest, if any, and thereafter
against the unpaid balance of the Principal Amount.
6. Security.
--------
The payment of this Note is secured by a Stock Pledge/Security Agreement
(hereinafter the "Security Agreement") executed by Maker in favor of Holder of
even date herewith with respect to certain common stock of Holder owned by
Maker. The Security Agreement contains provisions for acceleration of the
maturity of this Note on the occurrence of certain described events.
7. Acceleration Upon Default.
-------------------------
At the option of Holder, all or any part of the indebtedness of Maker
hereunder shall immediately become due and payable, irrespective of any agreed
maturity, upon the happening of any of the following events of default ("Event
of Default"):
(a) Upon the occurrence of any event of default described under the
Security Agreement;
(c) If any of the following events constituting default occurs,
provided, however, that if any such event of default is reasonably susceptible
of being cured, Maker shall be entitled to a grace period of thirty (30) days
following written notice of such event of default to cure it, and further
provided, that if such event of default is of such character as to reasonably
require more than thirty (30) days to cure, Maker has promptly commenced to cure
said events of default within the thirty (30) day period and uses reasonable
diligence thereafter in curing such events of default, the thirty (30) day
period shall be reasonably extended (but not to exceed one hundred twenty days
(120)):
(i) If Maker shall breach any non-monetary condition or
obligation imposed on Maker pursuant to the terms of this Note;
(ii) If Maker shall make an assignment for the benefit of
creditors;
(iii) If a custodian, trustee, receiver, or agent is appointed
or takes possession of substantially all of the property of Maker;
14
<PAGE>
(iv) If Maker becomes insolvent as that terms is defined in
Section 101(26) of Title 11 of the United States Code;
(v) If Maker shall (A) file a petition with the Bankruptcy
Court under the Bankruptcy Code, or (B) otherwise file any petition or
apply to any tribunal for appointment of a custodian, trustee, receiver, or
agent of Maker, or commence any proceeding related to Maker under any
bankruptcy or reorganization statute, or under any arrangement, insolvency,
readjustment of debt, dissolution, or liquidation law of any jurisdiction,
whether now or hereafter in effect;
(vi) If any petition is filed against Maker under the
Bankruptcy Code and either (A) the Bankruptcy Code orders relief against
Maker under the chapter of Bankruptcy Code under which the petition was
filed, or (B) such petition is not dismissed by the Bankruptcy Court within
thirty (30) days of the date of filing;
(vii) If any petition or application of the type described in
Subparagraph (v)(A) above is filed against Maker, or any proceeding of the
type described in Subparagraphs (v)(A) or (v)(B) above is commenced, and
either (1) Maker, by any act, indicates his approval thereof, consent
thereto, or acquiescence therein, or (2) an order is entered appointing any
such custodian, trustee, receiver, or agent, adjudicating Maker bankrupt or
insolvent, or approving such petition or application in any such
proceeding, and any such order remains in effect for more than thirty (30)
days;
(viii) If any attachment, execution, or other writ is levied on
substantially all of the assets of Maker and remains in effect for more
than fifteen (15) days.
8. Collection Costs and Attorneys' Fees.
------------------------------------
(a) Maker agrees to pay Holder all costs and expenses, including
actual attorneys' fees, paid or incurred by Holder in connection with the
collection or enforcement of the Note or any instrument securing payment of this
Note, including defending the priority of such instrument or as a result of
foreclosure against, or conducting a trustee sale thereunder.
(b) In the event any party institutes or should the parties
otherwise become a party to any action or proceeding in connection with the
enforcement or interpretation or collection of this Note or any instrument
securing payment of this Note, or for damages by reason of any alleged breach of
this Note or any provision hereof or any alleged breach of any instrument
securing payment of this Note or any provision thereof, or for a declaration of
rights in connection with this Note or any instrument securing payment of this
Note, or for any other relief, including
15
<PAGE>
equitable relief, in connection with this Note or any instrument securing
payment of this Note, the prevailing party in any such action or proceeding
shall be entitled to receive from the non-prevailing party all costs and
expenses including, without limitation, actual attorneys' and other fees
incurred by the prevailing party in connection with such action or proceeding.
9. Notice.
------
Any notice to Maker provided for in this Note shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, addressed to Maker at the address set
forth below where this Note is executed, or to such other address as Maker may
designate by written notice to Holder. Any notice to Holder shall be given by
personal delivery or by express mail, Federal Express, DHL or similar
airborne/overnight delivery service, or by mailing such notice by first class or
certified mail, return receipt requested, to Holder at the address set forth
below where this Note is executed, or at such other address as may have been
designated by written notice to Maker. Mailed notices shall be deemed delivered
and received three (3) days after deposit in accordance with this provision in
the United States mail.
10. Usury Compliance.
----------------
All agreements between Maker and Holder are expressly limited, so
that in no event or contingency whatsoever, whether by reason of the
consideration given with respect to this Note, the acceleration of maturity of
the unpaid Principal Amount and interest thereon, or otherwise, shall the amount
paid or agreed to be paid to Holder for the use, forbearance, or detention of
the indebtedness which is the subject of this Note exceed the highest lawful
rate permissible under the applicable usury laws. If, under any circumstances
whatsoever, fulfillment of any provision of this Note or any agreement securing
payment of this Note or executed in connection with this Note after timely
performance of such provision is due, shall involve transcending the limit of
validity prescribed by law which a court of competent jurisdiction deems
applicable, then the obligations to be fulfilled shall be reduced to the limit
of such validity, and if, under any circumstances whatsoever, Holder shall ever
receive as interest an amount that exceeds the highest lawful rate, the amount
that would be excessive interest shall be applied to the reduction of the unpaid
Principal Amount and/or late charges under this Note and not to the payment of
interest, or, if such excessive interest exceeds the unpaid balance of the
Principal Amount and/or late charges under this Note, such excess shall be
refunded to Maker.
11. General.
-------
(a) No delay or omission on the part of Holder in exercising any
rights under this Note or under any instrument given to secure this Note, on
default by Maker, including, without limitation, Holder's right to accelerate,
nor reinstatement of this Note by Holder after such exercise, shall operate as a
waiver of Maker's right to exercise such right or of any other right under
16
<PAGE>
this Note or the instruments given to secure this Note, for the same default or
any other default.
(b) Except for the provision of written notice hereinabove set
forth, Maker hereby waives presentment for payment, demand, protest, notice of
protest and notice of dishonor, and all other notices to which Maker might
otherwise be entitled, and further waives the right to require Holder to proceed
against any security for this Note before proceeding against Maker, and further
waives all defenses based on release of security or extension of time or other
indulgence given in respect to payment of this Note.
(c) Holder shall have the right to sell, assign, or otherwise
transfer, either in part or in its entirety, this Note, and any instrument
evidencing or securing the indebtedness of this Note (provided such instrument
is transferred as security for the portion of the Note which is conveyed),
without the consent of Maker. The assignment of this Note by Holder shall be
ineffective until actual notice of same is received by Maker. Maker shall have
no right to delegate its duties under this Note or any instrument securing this
Note without the written consent of Holder, which consent Holder shall not
unreasonably withhold, provided, however, no delegation of such duties or
obligations shall release Maker from any duty or obligation under this Note or
instrument securing payment of this Note.
(d) Subject to the foregoing Subparagraph (c), this Note and all of
the covenants, promises, and agreements contained in it shall be binding on and
inure to the benefit of the respective legal and personal representatives,
devises, heirs, successors, and assigns of Maker and Holder.
(e) This writing is intended by the parties to be an integrated and
final expression of this Note and also is intended to be a complete and
exclusive statement of the terms of that agreement. No course of prior dealing
between the parties, no usage of trade, and no parol or extrinsic evidence of
any nature shall be used to supplement, modify or vary any of the terms hereof.
There are no conditions to the full effectiveness of this Note except as
specifically provided herein.
(f) If any provision of this Note, or the application of it to any
party or circumstance, is held to be invalid, the remainder of this Note, and
the application of such provision to other parties or circumstances, shall not
be affected thereby, the provisions of this Note being severable in any such
instance.
(g) This Note shall be governed by, interpreted under and construed
and enforced in accordance with the laws of the State of California applicable
to contracts entered into in the State of California, by residents of the State
of California, and intended to be performed entirely within the State of
California. Any action to enforce payment of this Note shall be filed and heard
solely in the Municipal or Superior Court of Los Angeles County, California.
17
<PAGE>
(h) Time is of the essence for each and every obligation under this
Note.
MAKER:
Exhibit Only--Do Not Sign
-------------------------
William C. Huddleston
MAKER'S ADDRESS:
Mr. William C. Huddleston
c/o Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
HOLDER'S ADDRESS:
Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016
DO NOT DESTROY THIS NOTE; WHEN PAID, THIS NOTE
MUST BE SURRENDERED TO MAKER FOR CANCELLATION
18
<PAGE>
EXHIBIT "2"
-----------
PLEDGED STOCK
Corporation Name Certificate No. Number of Shares
- ---------------- --------------- ----------------
1.
------------ ----- --------
2.
------------ ----- --------
3.
------------ ----- --------
19
<PAGE>
EXHIBIT "3"
-----------
ASSIGNMENT OF CORPORATE SHARES
(Without Certificate)
FOR VALUE RECEIVED, the undersigned hereby assigns to Pollet & Associates,
a California corporation, Pledgeholder, pursuant to that certain Stock
Pledge/Security Agreement,____________________________ shares of common stock
of Staar Surgical Company, a Delaware corporation, represented by certificate
number(s)_____________________, standing in the undersigned's name on the books
of said corporation, and do hereby instruct and appoint the custodian of that
corporation's stock books to so transfer the said stock on the books of said
corporation.
Dated: February 28, 1991 EXHIBIT ONLY - DO NOT SIGN
--------------------------
William C. Huddleston
SIGNATURE GUARANTEE:
- -------------------
20
<PAGE>
EXHIBIT 10.12
AMENDED AND RESTATED
--------------------
SOFT IOL LICENSE AGREEMENT
--------------------------
THIS AGREEMENT ("Agreement"), originally made and entered into as of
the 14th day of March, 1990, by and among STAAR Surgical Company, a Delaware
corporation ("STAAR"), Softlensco, Inc., a Delaware corporation ("Softlenscol"),
and The Cooper Companies, Inc., a Delaware corporation ("Cooper"), and assigned
by Cooper to Iolab Corporation, a California corporation ("Iolab"), is hereby
amended and restated as of the 31st day of January, 1992, by and among STAAR,
Softlensco and Iolab.
W I T N E S S E T H:
Whereas, STAAR is the sole owner of the entire right, title and
-------
interest in and to the patents, trade secrets, and other proprietary technical
know-how used in connection with the manufacture, insertion and application of
soft intraocular lens products;
Whereas, STAAR has previously granted to Cooper the right to
-------
manufacture and sell certain intraocular lens products pursuant to this
Agreement;
Whereas, STAAR has previously granted to Allergan Medical Optics, a
-------
California corporation and a subsidiary of Allergan, Inc., a Delaware
corporation ("AFO"), a coexclusive license, except as to STAAR and existing
licensees which includes Cooper, to make, have made, use and sell certain
products and to practice inventions covered by the Licensed Patents (as defined
below) (the "AMO License");
Whereas, the validity of the AMO License is in question;
-------
Whereas, concurrently herewith STAAR, Cooper and Iolab have
-------
consummated the transactions contemplated by the Stock Purchase and Assignment
of License Agreement, dated as of January 31, 1992 (the "Stock Purchase and
Assignment of License Agreement"), among STAAR, Cooper, Iolab and TCC Subsidiary
Number 11, Inc., pursuant to which, among other things, Cooper has assigned all
of its rights and interests under this Agreement to Iolab; and
Whereas, STAAR and Iolab wish to amend this Agreement to provide to
-------
Iolab a nonexclusive world-wide royalty-bearing license to use the Licensed
Patents to manufacture, distribute, market and sell the Licensed Products (as
defined below) upon the terms and subject to the conditions contained herein.
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth in this Agreement, the parties agree as follows:
1
<PAGE>
1. DEFINITIONS.
------------
For the purpose of this Agreement, and solely for such purpose, the
terms set forth hereinafter shall be defined as follows:
1.1 "Affiliate" of, or any entity "Affiliated" with, a specified
entity, shall mean an entity that directly or indirectly controls, is controlled
by, or is under common control with, the entity specified.
1.2 "Calendar Quarter" shall mean the usual and customary Iolab
calendar quarter, used for internal accounting procedures, of approximately
three (3) months, in which each of the first two (2) months consist of four (4)
weeks and the third month consists of five (5) weeks.
1.3 "Effective Date" shall mean the date first above written.
1.4 "Licensed Products" shall mean any intraocular lens products, and
devices used to insert and/or apply the intraocular lens products, made, used or
sold for use in a manner which is covered by a Valid Patent Claim of the
Licensed Patents.
1.5 "Licensed Patents" shall mean the patents and patent applications
listed on "Exhibit A" and any patents maturing therefrom, together with all
divisions, continuations, continuations-in-part, substitutions, reissues,
extensions or foreign counterparts thereof.
1.6 "Person" shall mean an individual, corporation, partnership or
other entity.
1.7 "Net Sales" or "Net Unit Sales" or "Net Selling Price" shall
mean the actual selling price of Licensed Products sold by Iolab to others as
per the invoices covering Iolab's sales, less bona fide trade and cash
discounts, allowance for returns, give-aways, promotions or replacements or
other returns, and less sales and other taxes and governmental charges
applicable to sales; provided, that the Licensed Products sold between Iolab and
its Affiliates, or between Iolab's Affiliates, shall not be regarded as sold for
computation of Net Sales receipts until sold by Iolab or its Affiliate to a
third party other than an Affiliate, in which case the computation of Net Sales
will be made based on the selling price to such third party.
1.8 "Valid Patent Claim" shall mean a bona fide, unexpired claim in
the Licensed Patents which has not been held invalid or unenforceable by a
decision of a court or other governmental agency of competent jurisdiction,
unappealable or unappealed within the time allowed for appeal, and which has not
been admitted to be invalid by the owner through reissue or disclaimer. If
there should be two or more such decisions conflicting with respect to the
validity of the same claim the decision of the higher or highest tribunal shall
thereafter control, however, should the tribunals be of equal dignity, the
decision or decisions holding the claim invalid shall prevail.
2. LICENSE GRANT.
--------------
2.1 Grant. STAAR hereby grants to Iolab upon the terms and subject
-----
to the conditions herein specified, a world-wide, nonexclusive, nontransferable,
royalty-bearing license to use the Licensed Patents to manufacture, have
manufactured, sell, distribute and market the Licensed Products and to practice
the inventions covered by the Licensed Patents. Iolab acknowledges that its
rights granted under this Section 2.1 in Japan are subject to the prior rights
granted by STAAR to Canon-STAAR Co., Inc. ("Canon-STAAR") in that certain
Technical Assistance and License Agreement dated September 6, 1988 (the "Canon-
STAAR Agreement").
2.2 Marketing Obligations. STAAR acknowledges that Iolab has no
---------------------
affirmative obligation to sell Licensed Products, and therefore shall not be
obligated to use its best efforts in marketing Licensed Products. All business
decisions, including without limitation the design, manufacture, sale, price and
promotion of Licensed Products shall be within the sole discretion of Iolab.
2
<PAGE>
2.3 Limitation. STAAR and Iolab covenant and agree that neither
----------
party shall (i) manufacture for, have manufactured for, or sell Licensed
Products to unaffiliated third parties under labels or brand names other than
their own respective labels and brand names, or (ii) in any way create a de
facto sublicense, unpermitted assignment or private labeling arrangement with an
unaffiliated third party; provided, however, that nothing herein shall restrict
STAAR from manufacturing Licensed Products for Chiron Ophthalmics, Inc. or
Canon-STAAR under their respective labels or brand names for sale or use by such
parties or from manufacturing Licensed Products for any licensees of STAAR
solely for investigational use; and provided further, that nothing herein shall
restrict Iolab from manufacturing Licensed Products for STAAR or any of STAAR's
licensees.
3. ROYALTY.
--------
3.1 Percentage. Iolab shall pay STAAR a royalty of six percent (6%)
----------
of Net Sales payable quarterly for all sales of Licensed Products; provided,
--------
that unless and until AMO agrees, or a court of competent jurisdiction
determines in a final non-appealable judgment, either that the AMO License is no
longer valid and enforceable or that AMO does not have a license which is
exclusive or co-exclusive under the AMO License to make, have - made, use and
sell the Licensed Products and to practice inventions covered by the Licensed
Patents, Iolab shall only be required to pay one half the amount of such royalty
(three percent (3%) of Net Sales), payable quarterly, and the remaining half of
such royalty shall be waived by STAAR and shall not accrue.
Notwithstanding the above, no royalties shall accrue for the sale of
Licensed Products unless and until the total amount of earned royalties exceeds
the Prepaid Royalty (as defined in and adjusted pursuant to the Stock Purchase
and Assignment of License Agreement). Further, and in any event, such Prepaid
Royalty is considered by STAAR as complete satisfaction of any duty, whether
express or implied, imposed upon Iolab to commercially exploit its rights under
this Agreement.
3.2 Composite Sales. In the event that a Licensed Product is sold as
---------------
part of a composite unit and if, as such part, the Licensed Product does not
have a separate invoiced selling price, then for the purposes of computing
royalties, the following guidelines shall apply:
(1) Net Selling Price of such Licensed Product shall be deemed
to be equal to the product of (x) a fraction, the numerator of which is the
established current net selling price of such composite unit and the denominator
of which is the sum of the established current net selling prices of each of the
components of the composite unit sold as a separate unit, times (y) the
established current net selling price of the Licensed Product; provided,
however, that the product of this fraction shall not be less than 90% of the
previous three (3) month rolling average Net Selling Price of the Licensed
Product; or
(2) If the computation set forth in (1) cannot be made for any
reason, then the Net Selling Price of the Licensed Product shall be the
established current Net Selling Price for such Licensed Product when sold and
invoiced as a separate unit.
3.3 Most Favored Nation. In the event STAAR shall grant to any third
-------------------
party any license or other right under any of the Licensed Patents for any
period of time, and such license or other right includes a royalty based on
sales of Licensed Products, STAAR shall, within thirty (30) days of the granting
of such license or other right, provide written notice of such grant to Iolab,
and Iolab shall have the option to obtain the same royalty rate granted such
third party thereunder.
3.4 Clinical Testing. No royalties shall accrue for the sale of
----------------
Licensed Products in conjunction with clinical tests or trials conducted in
accordance with the guidelines of the U.S. Food and Drug Administration and any
other appropriate governmental agency.
3.5 Currency. Earned royalties based on sales in any foreign
--------
countries shall be payable to STAAR in the United States in United States
dollars. The rate of exchange for such payments shall be the midpoint between
the buying and selling rate for United States Dollars as quoted by the Federal
Reserve Statistical Release, at the close of business on the day immediately
preceding the day of payment.
3
<PAGE>
4. TERM.
-----
This Agreement shall be effective on the Effective Date and shall
remain in effect until the expiration of the last Licensed Patent (the "Term").
5. TERMINATION AND EFFECT OF TERMINATION.
--------------------------------------
5.1 Termination. This Agreement may be terminated by one party
-----------
giving notice to the other party of its intent to terminate, while stating with
specificity the grounds therefor, in the event that the other party fails to
perform or otherwise breaches any material obligations hereunder. The party so
notified shall have sixty (60) days after receipt of the notice to cure the
breach or seek legal redress. In no event shall such notice of intention to
terminate be deemed to waive any right to damages or any other remedy which the
party giving the notice may have as a consequence of such failure of such
breach.
5.2 Effect of Termination. In the event that this Agreement is
---------------------
finally terminated prior to the expiration of its Term pursuant to this Section
5 (i.e., by operation of the present terms or legal decree):
A. Iolab shall have the right to dispose of all the Licensed
Products coming under the terms of this Agreement, to utilize all inventory then
on hand to produce such Licensed Products, and to complete all orders for
Licensed Products then on hand. Royalties shall be paid with respect to such
Licensed Products as though this Agreement had not been terminated.
B. Both parties hereto shall be released from all obligations
and duties imposed or assumed hereunder except as expressly provided to the
contrary in this Agreement and except as to the provisions of Section 7 below.
6. RECORDKEEPING AND REPORTS.
--------------------------
6.1 Reports. Within sixty (60) days after each Calendar Quarter in
-------
respect of which payments are due under Section 3 hereof, Iolab shall prepare
and send to STAAR a report setting forth Net Sales of the Licensed Products by
Iolab and its Affiliates during such Calendar Quarter, which report shall
contain a computation of the payments due hereunder.
6.2 Records. Iolab shall keep accurate records in respect of all
-------
sales of the Licensed Products by Iolab and its Affiliates and shall maintain
such records for a period of not less than two (2) years from the date of its
report to STAAR under Section 6.1 hereof. STAAR shall have the right, at its
sole cost and expense, not more than once each year, to have Iolab's records
reviewed in respect of sales of the Licensed Products at times which are
reasonably convenient to Iolab, using a certified public accountant. Any
reports rendered by Iolab to STAAR prior to the date of such review as to which
STAAR raises no reasonable written objection within sixty (60) days after the
commencement of such review shall be deemed conclusive and binding, provided
Iolab has not unreasonably impeded such review. If the review determines that
the royalties actually due hereunder exceeded 10% or more than the amount of
royalties reported by Iolab for such Calendar Quarter pursuant to Section 6.1
hereof, Iolab shall bear the costs and expense of such review and promptly pay
all amounts due plus interest at the legal maximum rate.
6.3 Final Report. At the termination of this Agreement, Iolab shall
------------
render a final report to STAAR within sixty (60) days after the end of the
Calendar Quarter in which such termination occurs and payments shall be made to
STAAR for the portion of the year ending at the date of termination.
4
<PAGE>
7. ENFORCEMENT, WARRANTY AND INDEMNIFICATION.
------------------------------------------
7.1 STAAR's Warranties and Representations.
---------------------------------------
STAAR represents and warrants that:
A. it has the sufficient right, title and interest in and to
the Licensed Patents to enter into this Agreement;
B. to the best of STAAR's knowledge and belief, the Licensed
Products do not infringe upon any patent, trademark or copyright of any third
party;
C. to the best of STAAR's knowledge and belief and except for
the possible rights which may be alleged by AMO under the AMO License, there are
no additional rights needed from STAAR or any third party for Iolab to
manufacture and sell the Licensed Products.
7.2 Indemnification By STAAR. STAAR agrees to indemnify, hold
------------------------
harmless, and defend Iolab from and against any and all damages, costs, and
expenses, including reasonable attorneys' fees, incurred in connection with a
claim which, if true, would constitute a breach of the foregoing warranties
(hereinafter "Infringement Claims"); provided STAAR is notified promptly in
writing of an Infringement Claim and has sole control over its defense or
settlement, and Iolab provides reasonable assistance (at STAAR's expense and
reasonable request) in the defense of the same.
A. Following notice of an Infringement Claim, STAAR shall at
its option and expense procure for Iolab the right to continue to (i) use the
alleged infringing Licensed Products, (ii) replace or modify the Licensed
Products to make it not infringing, or (iii) reimburse Iolab for so much of the
consideration paid hereunder as is reasonable in light of the amount and
duration of impairment of Iolab's use of the Licensed Products.
B. STAAR shall have no liability for any Infringement Claim
based on Iolab's (i) use or distribution of products utilizing the Licensed
Patent(s) after STAAR's written reasonable notice that Iolab should cease such
use or distribution due to an Infringement Claim (except that this clause shall
not apply to Iolab's use or distribution of products incorporating the Licensed
Patent(s) after receipt of such notice to the extent such use or distribution is
required for fulfillment of obligations to third parties entered into on or
before the date such notice is received), or (ii) Infringement Claims based
solely upon Iolab's or its Affiliates' modification or enhancement of the
Licensed Products. For all Infringement Claims arising solely under this
Section 7B, Iolab agrees to indemnify and defend STAAR from and against all
damages, costs and expenses, including reasonable attorneys' fees, provided that
such indemnity obligation shall not supersede, replace, limit or relieve any
other obligations STAAR may have with respect to said Infringement Claim.
7.3 Third Party Infringement. The parties acknowledge that it is of
------------------------
the utmost importance to STAAR and Iolab to protect the Licensed Patents against
infringement. Each party shall promptly notify the other party in writing of
any infringement by third parties relating to the Licensed Patents. STAAR shall
initiate and pursue legal proceedings and other actions to protect the Licensed
Patents, provided that STAAR shall not be obligated to initiate separate
--------
litigation against more than one infringer at any one time. Should STAAR refuse
to take legal action, Iolab shall have the right, but not the obligation to
initiate and pursue legal proceedings to protect the Licensed Patents. Each
party shall cooperate, at the other party's request and expense, in any actions
taken by such requesting party including, without limitation, being joined as an
accessory co-plaintiff in any legal proceeding brought by such requesting party.
In any such proceeding, any recoveries or proceeds of a settlement shall first
be applied to associated legal costs and expenses and the balance shall be
divided between STAAR and Iolab in proportion to their respective provable
damages.
7.4 Limitation. STAAR assumes no responsibility for the manufacture
----------
or end-use of Licensed Products manufactured by, or for, or sold by Iolab or any
of its Affiliates. All representations or warranties made in connection with
the sale of Licensed Products by Iolab and its Affiliates as manufacturer and/or
seller shall in no way
5
<PAGE>
directly or impliedly refer to or obligate STAAR. Iolab shall indemnify, save
and hold harmless STAAR, its successors and assigns from any and all costs,
expenses, damages and awards (including reasonable attorneys' fees) of any kind
relating to any actual or threatened claim made against or any judgment, award
or verdict of any kind against STAAR resulting from or arising from a
representation or warranty, whether express or implied, of Iolab or any of its
Affiliates.
7.5 Indemnification by Iolab. Iolab agrees to indemnify, hold
------------------------
harmless and defend STAAR from and against any and all damages, costs and
expenses, including reasonable attorneys' fees, incurred in connection with a
claim made by AMO on any royalties paid by Iolab to STAAR hereunder.
8. DUTY OF CONFIDENTIALITY.
------------------------
8.1 Confidentiality. Each party ("Receiving Party") shall maintain
---------------
in confidence all information disclosed by the other party ("Disclosing Party")
which such party knows or has reason to know comprises trade secrets and other
proprietary information of the other, and shall not use such trade secrets or
proprietary information except as permitted by this Agreement or disclose the
same to anyone other than those of its employees, consultants and agents as are
necessary in connection with such party's permissible activities as contemplated
in this Agreement. To the extent permitted by applicable law, each party shall
have obtained written agreement prior to disclosure to such employees,
consultants and agents, to hold in confidence and not make use of such trade
secrets or proprietary information for any purpose other than those permitted by
this Agreement. Each party shall notify the other promptly upon discovery of any
unauthorized use or disclosure of the other's trade secrets or proprietary
information. The obligation of confidentiality contained in this Section 8
shall not apply to the extent that (i) the Receiving Party is required to
disclose information by applicable law, regulation or order of a governmental
agency or a court of competent jurisdiction; (ii) the Receiving Party can
demonstrate that the disclosed information was at the time of disclosure already
in the public domain other than as a result of actions or failure to act by the
receiving party in violation hereof; (iii) the disclosed information was
rightfully known by the Receiving Party (as shown by its written records) prior
to the date of disclosure to the Receiving Party; or (iv) the disclosed
information was received by the Receiving Party on an unrestricted basis from a
source which is neither STAAR or Iolab and which is not under a duty of
confidentiality to the other party. The parties' obligations under this Section
8 shall survive for a period of two (2) years after termination of this
Agreement.
9. WAIVER.
-------
STAAR hereby waives any claim which STAAR might have for any
infringement by Iolab of any of the Licensed Patents.
10. DISCLOSURE.
-----------
Iolab and STAAR agree to keep the existence and the terms of this
Agreement confidential. This Agreement or any copies of this Agreement may not
be given to any third parties, except to legal, accounting, financial or other
similar advisors or as may be expressly agreed to by Iolab and STAAR in writing.
11. FURTHER ASSURANCES.
-------------------
Iolab and STAAR agree that at any time and from time to time after the
execution of this Agreement, whether before or after Closing, either party will,
upon the request of the other party, execute and deliver such further documents
and do such other things, as such party may reasonably request in order to
accomplish the purpose and terms hereof.
6
<PAGE>
12. MISCELLANEOUS.
--------------
12.1 Entire Agreement. This Agreement together with the Stock
----------------
Purchase and Assignment of License Agreement constitute the entire agreement and
supersedes all prior agreements and understandings, both written or oral,
between the parties hereto with respect to the subject matter hereof.
12.2 Successor and Assigns. This Agreement shall be binding upon the
---------------------
parties hereto and their respective successors and assigns. The rights and
obligations of each party under this Agreement shall not be assignable or
otherwise transferable without the prior written consent of the other party,
except that any party hereto may (1) assign any or all of its rights or
obligations under this Agreement to any of its Affiliates, which assignment
shall not release such assigning party from any of its obligations under this
Agreement, and (2) assign all of any party's rights and obligations under this
Agreement to any other person or entity in connection with the transfer or sale
of all or a portion of its business to any person or entity or the merger or
consolidation of such party with or into any other entity, so long as such
transferee, purchaser or surviving entity shall assume such obligations of such
assigning party.
12.3 Notice. All notices hereunder shall be in writing and shall be
------
deemed to have been duly given if delivered personally, one day after delivery
to a nationally recognized overnight delivery service, charges prepaid, three
days after sent by registered or certified mail, postage prepaid, or when
receipt is confirmed if by telex, facsimile or other telegraphic means:
In the case of STAAR:
STAAR Surgical Co.
1911 Walker Avenue
Monrovia, California 91016
Attn: John R. Wolf, President
with a copy to:
Paul, Hastings, Janofsky & Walker
555 South Flower Street
Los Angeles, California 90071
Attn: John W. Avery, Esq.
In the case of Iolab:
Iolab Corporation
500 Iolab Drive
Claremont, California 91711-4881
Attn: Vice President of Sales
and Marketing
with a copy to:
Chief Patent Counsel
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08903
Such addresses may be altered by written notice given in accordance
with this section.
7
<PAGE>
12.4 Waiver. Any terms of this Agreement may be amended, modified or
------
waived only with the prior written consent of the party against whom enforcement
of such amendment, modification or waiver is sought.
12.5 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California notwithstanding the
application of its choice of laws principles.
12.6 Headings. The headings herein are for convenience only and shall
--------
not be deemed to limit or otherwise affect the construction hereof.
12.7 Severability. If any provision of this Agreement shall be held
------------
invalid, illegal or unenforceable in any respect, the validity, legality or
enforceability of all other provisions of this Agreement shall not in any way be
affected or impaired.
12.8 Relationship of Parties. The relationship between STAAR and
-----------------------
Iolab is that of independent contractors. Neither party, nor its agents and
employees, shall under any circumstances be deemed an agent or representative of
the other and neither shall have authority to act for and/or bind the other in
any way, or represent that it is in any way responsible for acts of the other.
This Agreement does not establish a joint venture, agency or partnership between
the parties.
12.9 Time. Time is of the essence of this Agreement with respect to
----
each and every provision of this Agreement in which time is a factor.
12.10 Further Assurances. Each of the parties hereto agrees to execute
------------------
and deliver such other documents and take such other action as may be necessary
to more effectively consummate the purposes and subject matter of this
Agreement.
12.11 Arbitration. Any controversy or claim arising out of or
-----------
relating to this Agreement, or the breach thereof, including any dispute
relating to patent validity or infringement arising under this Agreement, shall
be settled by arbitration. Such arbitration shall be conducted in Los Angeles,
California, in accordance with the rules then pertaining to the American
Arbitration Association with a panel of three (3) arbitrators. The law of the
State of California shall apply to the arbitration proceedings. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
12.12 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one of such counterpart.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
STAAR SURGICAL COMPANY
a Delaware corporation
By: /s/ John R. Wolf
_____________________________
Its: President
SOFTLENSCO, INC.
a Delaware corporation
By: /s/ John R. Wolf
______________________________
Its: President
IOLAB CORPORATION
a California corporation
By: /s/ Robert V. Toni
______________________________
Its: V.P. Sales & Marketing
_______________________
9
<PAGE>
EXHIBIT A
Licensed Patents
Patent No. 4,573,998 Methods for Implantation of
Deformable Intraocular Lenses
Patent No. 4,715,373 Devices for implantation of
Deformable Intraocular Lens
Structures
Patent No. 4,702,244 Surgical Device for Implantation
Of a Deformable Intraocular Lens
10
<PAGE>
EXHIBIT 10.20
PATENT LICENSE AGREEMENT
The Eye Microsurgery Entersectoral Research and Technology Complex, Moscow,
Russia, represented by General Director Mr. Fedorov S. N., from here and
referred to as the "Licenser" and STAAR Surgical AG, a Swise corporation, Hidau,
Switzerland represented by President Mr. Vladimir Feingold and Director Mr. John
R. Wolf, from here and referred to as the "Licensiate", taking into account that
the Licenser possesses the "Technology for Producing Collagen-Based Cross-Linked
Drain", and the Licensiate wants to acquired the license on this technology.
The Licenser and Licensiate agree as follow understandings, which shall
become in force since 1. 1. 96.
ARTICLE 1.
DEFINITIONS: For the purpose of this Agreement the following expressions have
the meanings indicated below:
1.1 "Product" is the product described in Appendix 1.
1.2 "Patent" is the patent whose detailed description is given in Appendix
2 and also future inventions are given in Appendix 3.
1.3 "Technical knowledge" stands for technical information, know-how,
manufacturing technology, technical data, material specifications, and other
information used by the Licenser during the manufacture of the product (or which
is necessary and sufficient for the Licensiate to make the Product according to
the standard and quality of the product made by the Licenser), (including any
improvements obtained during the validity period of this Agreement).
1.4 "Territory" covers all countries listed in Appendix 5.
1.5 "Exclusive territory" covers the countries listed
<PAGE>
- 2 -
in part 1 of Appendix 4.
1.6 "Non-exclusive territory" covers the countries listed in part 2 of
Appendix 4.
1.7 "Year" means any period of time of 12 months starting from the date of
executing the Agreement.
ARTICLE 2.
The Licenser is an owner of Patents listed in Appendix 2, and has the right
of disposal of the said Patents.
No prior transfers occured. No share or total property covered by the
Patents have been transfered, yielded or alienated to any person exept for the
Licensiate according to this Agreement.
The Licenser has not given any license under listed in Appendix 2 patents
yet. The Licenser's rights are free from the right of detension, pledge, backing
interest or other proprietary burdans. The Licenser disclosed to any third legal
or phisical person no confidental information, production secrets or know-how,
relating to the technical aspects of the Patents, except claim 3 in Appendix 1,
on which Licenser conduct the joint measures only with Licensiate.
Furthermore. the Licenser has production secrets and experience (know-how)
concerning the subject matter of this license.
ARTICLE 3.
Transferense of rights on the Patents and patent applications.
For valuable consideration, the receipt and sufficient of which are
confirmed by the Licensiate, the Licenser assigns to the Licensiate its entire
and exclusive rights, title, interest, and material right relating to the
"Patent" described in Appendix 2, and also the future Patents described in
Appendix 3 to this Agreement. The Licensiate shall acquire the entire and
exclusive right belonging to the Licenser to the Licensiates benefit for the
whole term of validity of the Patent.
<PAGE>
- 3 -
ARTICLE 4.
I. Technical field of application.
The license for the "Technology for Producing Collagen-Based Cross-Linked
Drains" relates to time entire sphere of application of the inventions mentioned
in the patents and listed in the Appendix 2 and 3, as well as everything that
definitively stems from these inventions.
The Parties shall infirm each other openly and without any reservations on
the possible fields of application of the inventions, that were unknown to the
Parties at the day of conclusion of the Agreement, and, as proved later, can be
carried by the Parties into effect and/or can be wanted for realization.
II. License type.
The Patent deals with an exclusive license:
(a) In so doing, however, the Licenser keeps the right of manufacturing
the products covered by the license, to use them or sell on a non-exclusive
territory specified in part 2 of Appendix 4.
(b) Furthermore, the Licenser reserves a right of realizing the product by
the license in its branches and joint ventures, existing or to be created, on
the exclusive specified in part 1 of Appendix 4, without right of salling to any
another third person on the exclusive territory. This thesis in force only for
cases when operation in medical branches and joint ventures is realized
surgeons, these surgeons works in Eye Microsurgery Intersectoral Research and
Technology Complex and officialy sents on the contract with the Licenser.
(c) This license is intended for manufacture, use and sale.
ARTICLE 5.
<PAGE>
- 4 -
Territory covered by the Agreement.
The license was granted for use on the exclusive territiry (see Appendix
4).
The Licensiate has the right of production on the other countries including
those where the Licenser has no protective rights. The Licenser shall prevent
export to the countries which belongs to non-exculsive territory.
If, in spite of this, the export shall be effected, the Licensiate shall
have the right of cancelling the Agreement by means of a simple written message.
The Licenser shall pay conventional penalty equal to 20-fold price of the
export delivery, which is inadmissible by virtue of the above statements.
In the equivalent manner the Licenser shall put on its customers an
obligation to avoid export of the subject matter of this license, because it is
inadmissible according to the above statemnts, and to pay to it a conventional
penalty in an amount of 20-fold price of the exported goods in every case of
infringment. This sum the Licenser shall transfer to Licensiate.
Article 6.
License registration.
Each Party shall have the right of registering the license in the Patent
Office provided that such registration of the country or countries, with respect
to which the license is given. The Licenser shall transfer to the licensiate the
authority and approval swich is necessary for this purpose. The registration fee
shall be covered by the licensiate.
Article 7.
Drawings and descriptive documents.
<PAGE>
- 5 -
The Licenser shall give to the Licensiate all existing drawing, plans,
quality inspection system, and other technical documents required for the
manufacture under license. These documents may be dublicated. The Licensiate
shall treat these drawings and documents as secret materials during the entire
term of action of this Agreement and after it will be expired.
Article 8.
Mastering.
The Licenser is released from responsibility for the risk associated with
the industrial-scale mastering of the manufacture under license for which the
Licensiate is responsible.
The Licenser is released from responsibility for the risk of the commercial
realization of the invention. The realization risk is taken solely by the
Licensiate.
Article 9.
I. Quality of products manufactured under license.
The Licesiate shall manufacture the products under license whose quality is
the same as those manufactured by Licenser. The licenser provides all necessary
consultations and information accumulated from its own experience.
II. Consequences of poor quality of products manufactured under license.
The Licenser has the right of quality monitoring so as to check of the
products manufactured under license correspond to the quality established by the
Agreement.
III. Sublicenses.
1. The Licensiate has the right to offer sublicenses.
<PAGE>
- 6 -
2. In case of selling of sublicense the earning is distributed
between the Licenser and Licensiate of this Agreement in equal parts.
Article 10.
Improvements and amendments of the subject of license.
The Parties concluding this Agreement agree that they consider as secret
all technical and technological information relating to the Production under
license and made available to the Licensiate.
The information obtained from the Licenser is kept in secret during the
entire validity period of the Agreement and after the validity period of this
Agreement is expired.
The Licensiate has the right to use free of charge the entire technical
information after the validity period of this Agreement is expired.
Article 11.
Improvements and amendments of the subject of license.
The Licenser is obliged to inform the Licensiate about all modifications
made and improvements, that shall be made during the validity period of this
Agreement and concerning the subject matter of the license.
If the amendments and improvements shall lead to a patentable invention, it
must be transferred to the Licensiate free of charge with simultaneous
prolongation of the period validity under definite conditions.
Article 12.
Technical assistance.
The Licenser submits to the Licensiate scrupulously and unconditionally all
technical assistance and necessary advisement.
<PAGE>
- 7 -
The Licenser, at the expense of the Licensiate, shall sent specialists
under the following conditions:
- the skill of the sent personnel must be sufficient for solving the
technical problems that may arise with respect to the Agreement;
- the period of working shall be agreed later;
- the Licensiate shall cover the expenses associated with the
accommodation, transportation and insurance of the expartiate personnel.
The Licensiate shall pay the personnel wages in US dollars in an amount
twice he sum they have in their own country.
Article 13.
Amendments and improvements to be made by Licensiate.
The amendments and improvements that shall be made by the Licensiate with
respect to the subject of the license may be made without special permission of
the Licenser. The Licensiate has the right to perform the amendments and
improvements without Licenser's permission provided that the Licensiate alone
shall be responsible for these amendments and improvements.
Article 14.
Payment with conclusion of the Agreement.
14.1 The Licensiate shall pay to the Licenser on the corresponding account
of Russian "Vneshtorgbank" No 608-205-524 in the National Republican Bank of
New-York, USA, with an order to credit for the above sum account No 67087105/001
the Eye Microsurgery Intersectoral Research and Technology Complex in the
"Vneshtorgbank" Moscow the cum of the three hundred fifty thousand US dollars
(350.000 USD) as a single payment within 10 days when this Agreement come into
force and before transference of documents and draughts. Documentation shall be
transfered to the Licensiate when said sum comes to the specified bank.
<PAGE>
- 8 -
14.2 The sum of two hundred fifty thousand US dollars (250.000 USD) shall
be payed by the Licensiate on the before specified account within 10 dais after
receipt if the signed by the Licenser acts about full concession of the patent
rights.
14.3 The sum of one hundred fifty thousand US dollars (150.000 USD) shall
be payed by the Licensiate on the before specified account within 10 days after
receipt of the official decision of US Patent Office about registration of full
concession on the Licensiate name.
Article 15.
Royalty.
The Licensiate pays to the Licenser royalty depending on the volume of year
sales and as compensation of license price. Royalty pays as a percentages of
sums paid by its buyers for the products made under conditions of free plant
without packing, as well as the sums obtained from learning the technology used
in opthalmosurgery with deduction of trade taxes.
Then the volume of sales:
to 25.000 pieces.................5,0%
from 25.000 to 50.000 pieces.................4,5%
from 50.000 to 75.000 pieces.................4,0%
from 75.000 to 100,000 pieces................3,5%
more than 100,000 pieces................3,0%
Article 16.
Appearance of the right for license payment.
The right for license payment arises as soon as the Licensiate gets payment
from the buyer.
Article 17.
<PAGE>
- 9 -
Taxes and duties.
If direct sales taxes is taken in the Licesiates country, or in the country
on non-exclusive territory, they are paid by the Licensiate.
Article 18.
Accounting and reports.
The Licensiate is obligated to keep account in special books, in which it
shall put the accurate number of the products manufactured under license
according to this Agreement, original numbers applied onto the machines and all
other data need for calculation of the license prise. The Licenser has the right
to give an order to audit these books and their correspondence with the general
accounting of the Licensiate through an auditor by the Licensiate.
The Licensiate shall bear the expenses associated with such an audit.
Article 19.
Calculation on license payments.
The calculations on the license payments are performed at the end of each
quarter of a calendar year. The Licensiate shall send the complete data on these
calculations within a month following the day of their performance and to remit
the calculated sum within the same period.
If the Licensiate exceeds a time limit for payment, the Licenser may take
annual interest of 6% within 60 days each quarter.
Article 20.
Obligation on using the license.
The Licensiate is obliged to use the license.
<PAGE>
- 10 -
Article 21.
Affair on patent applications.
The Licenser pledges oneself to continue affair in russia and other
countries on application, patents on witch are not given by Patient Offices.
The Licensiate pledges oneself to give to the Licenser the copies of
decision of Patient Offices about full transference of patient rights on
inventions, within 10 days since the moment of receipt by the Licensiate.
Article 22.
Patent support.
The Licensiate shall support the Patent that is put as a base of this
license Agreement.
Article 23.
Patent rights protection.
If the Patent is infringed by a third party and the Licenser becomes aware
such infringement, the Licenser shall promptly notify the Licensiate in writing
of such infringement or unfair competition. The Licensiate, in its sole
discretion, shall determine if it shall defend the Patent infringement or unfair
competition, it shall so notify the Licenser. The Licenser agrees to cooperate
and assist in prosecution of any action in the nature of unfair competition or
patent infringement prosecuted by the Licensiate.
The Licenser shall support the Licensiate, fir of all, if such a support is
provided by the property right of the respective country. The Licenser shall
give the Licensiate all necessary authority and documents that shall enable the
Licensiate to bring a suit and to present witnesses or
<PAGE>
- 11 -
coauthors and also to take an active part infringement proceeding.
The party making a decision to suit the third party bears possible expenses
in preparation and conduction of legal proceedings.
Article 24.
Licensiates obligation to defend the parent rights.
The Licensiates commit itself that neither its personally nor its
authorized person shall dispute the patent rights put in the base of this
Agreement except the cases.
Article 25.
Cancellation of Patent: its effect on the Agreement.
If the protective rights setting up the base of this Agreement are
cancelled by the claim of a third party, the paid license payments in no case
shall be reimbursed, however, if the term of their payment does not yet
come,they shall not be taken.
Article 26.
Agreement validity.
The Agreement validity period is equal to that of the patent validity.
The Agreement shall come into force from the moment of its signing.
Article 27.
Force Majeure.
Either party is relieved from liability for partial or complete non-
performance of their obligations under present
<PAGE>
- 12 -
Agreement is some circumstances that aroused independent of their will.
The circumstances caused by events that were independent of the will of the
parties of this Agreement so that the fair party could not avoid or eliminate,
are considered as cases realising this party from its obligations, if they take
place after signing the Agreement and prevent its fulfillment completely of
partially.
The cases of unsurmountable force are reduced to the following events: war,
military actions, revolts, mobilization, road accidents and natural disasters,
legal acts of authorities affecting the fulfillment of the obligations, and all
other events which are considered as circumstances of unsurmountable force by a
competent arbitration court.
Article 28.
Applicable legislation.
This Agreement is applicable to the Swiss Law.
Article 29.
Legal protection and arbitration.
If any dispute or difference shall arise between the parties to this
Agreement as to any matter or thing arising in connection with the Agreement
then the agrrieved party shall give to the other party a notice in writing
setting out in full detailed particulars of the dispute or differences. Upon
receipt of the notice the parties shall agree to appoint the International
Chamber of Commerce shall appoint a date, time and venue (unless the parties
agree to a date, time and venue) for mediation proceedings to be held to discuss
in detail the dispute or difference. The parties shall not be legally
represented at the mediation proceedings but shall present, in their own manner,
with the assistance or witnesses and documentary evidence, the
<PAGE>
- 13 -
details of their respective cases. If, at the conclusion of the mediation
proceedings the parties fail to resolve the dispute or difference, either party
may give to the other party, within 14 days, a notice stating that the
expiration of 30 days it will proceed to have the dispute of differents referred
to a court of competent jurisdiction in Switzerland (or another country as the
parties agree) and at the expiration of such 30 days may so proceed.
Article 30.
Miscellaneous.
1. This Agreement covers all agreed provisions and aspects of the License
Agreement. It has no additional promises or terms as a condition of execution of
the License Agreement, along with other terms except those stated above. All
preliminary agreements, promises, negotiations or presentations, which are not
included into this License Agreement shall not be valid from the moment of its
singing. Any subsequent agreement, which shall lead to a charge or cancellation
of this License Agreement, shall be valid solely if it is made in writing and
signed by the authorized representatives of both parties.
2. Successors and Assigns.
This Agreement and all of its provisions shall be binding and insure to the
benefit of the successors and assigns of the parties.
If not states specifically in this Agreement, all requested notices,
requirements, questions, agreed statements, approvals, or other communications
between the partners shall be made in writing and delivered: (A) by a messenger
(such a message is delivered personally), (B) by telegraph or air express mail
(in doing so the messaged are sent by R-mail), (C) electronic mail, fax or
telephone provided that the receipt has a compatible device or confirms the
receipt of the message (in this case it is assumed that the
<PAGE>
- 14 -
transmission or reception of the message will be confirmed), or (D) by mailing a
registered or valuable letter (in this case it is assumed that the letter shall
be delivered at the 14th day after dispatching). The messaged are sent to the
following addresses:
Licensiate: STAAR Surgical AG
Hauptstrasse 104
CH 2560 Hidau
Switzerland
Attn: President
A copy to address:
STAAR Surgical Company
1911 Walker Avenue
Monrovia, California 91016
Attn: President - Chief Executive Officer
Licenser: Eye Microsurgery Intersectoral Research and
Technology Complex, Moscow, Russia, 127486,
Beskudnikovsky bulvar, 59-a.
The above addresses may be changed by notifying the other party about this
action, as mentioned above.
3. The right of signing the document.
Each party states that it has all necessary authority to sign this License
Agreement. All individual signings of this Agreement for the party that is a
corporation, company or another legal counsel, or a signature of a proxy or
another authorized person, is accompanied by confirmation of the fact that this
person has the right of putting his signature under the given document on behalf
of a respective organization or its manager.
4. Counterpart Copies.
This Agreement may be signed in counterpart or duplicate copies, and any
signed counterpart or duplicate copy shall
<PAGE>
- 15 -
be equivalent to a signed original for all purposes.
5. Completeness of the Agreement.
This is the entire agreement between the parties covering everything agreed
upon or understood between the parties covering everything agreed upon or
understood with respect to the subject matter of it. There are no promises,
conditions, representations or terms of any kind as conditions or inducements to
the execution hereby or in effect between the parties other than as herein set
forth. Any prior agreement, promises, negotiations or representations not
expressly set forth in this Agreement are of not force or effect. Any agreement
hereafter made shall be ineffective to change, modify, discharge or effect an
abandonment of this Agreement in whole or in part unless such agreement is in
writing and signed by the party against whim enforcement of the change,
modification, discharge or abandonment is sought.
6. Preparation of Agreement.
It is acknowledged that each party hereto either had separate and
independent advice of counsel or the opportunity to avail itself of same. This
Agreement was prepared by the parties to it in conjunction with counseling from
their respective attorneys, or the opportunity to obtain such counseling. In
light of these facts it is acknowledged that no party to this Agreement shall be
construed to be solely responsible for the drafting of it, and therefore any
ambiguity shall not be construed against any party as the alleged draftsman of
this Agreement.
7. Gender and Number.
As used in this Agreement, the masculine, feminine, or neuter gender, and
the singular or plural number, shall include the others whenever the context so
indicated.
<PAGE>
- 16 -
8. Headings.
The titles and headings of the various sections of the Agreement are
intended solely for convenience of reference and are not intended solely for
convenience and are not intendid to explain, modify, or place any construction
on any of the provisions of this Agreement.
9. No Waiver.
The failure of a party to insist on the strict performance of any covenant
or duty required by this Agreement, or to pursue any remedy under the Agreement,
shall not constitute a waiver of the breach or the remedy.
10. Severability.
If any part or provision of this Agreement shall be determined to be
invalid, illegal or unenforceable,then the remaining part of this Agreement
which can be separated from the invalid, illegal or unenforceable provision
shall continue in full force and effect, and the invalid, illegal or
unenforceable provision shall continue in full force and effect, and the
invalid, illegal or unenforceable provision shall be construed as if they had
never been incorporated into this Agreement.
This Agreement and all of its provisions shall be binding on and inure to
the benefit of the successors of the parties.
11. Counterparts and Facsimiles.
For the convenience of the parties to this Agreement, this document may be
executed by facsimile signatures and in counterpart which shall together
constitute the agreement of the parties as one and the same instrument.
This License Agreement is conclude din four authentic copies, two of which
are in English and in Russian, all copies has an equal juridical force.
IN WITNESS WHEREOF, the parties thereto have executed this Assignment
Agreement on the day and year set forth opposite their respective signatures
below:
<PAGE>
- 17 -
"Licenser": Eye Microsurgery Intersectoral Research
and Technology Complex
General Director, academician
/s/ S.N. Fedorov S.N. Fedorov
-------------------
"Licensiate": STAAR Surgical AG
President and Director
/s/ Vladimir Feingold Vladimir Feingold
---------------------
Director
/s/ John R. Wolf John R. Wolf
-------------------
<PAGE>
- 18 -
Appendix N 1.
Technology of production intraocular lenses from collagen co-polimers
Nowadays, intraocular correction is one of the basic medical treatment
method of vision body disease.
Artificial eye linses are used not only when cataract, but also for removal
of refraction anomalies.
Artificial eye lenses, which are implantated through small sizes, are most
perspective. Several requirements are produced to artificial eye lenses like
elasticity, biocompatibility, low specific density and high solidity on rupture.
Artificial eye lenses from collagen co-polimers corresponds to these principles.
Highest elasticity, hight solidity on rupture are the main quality of these
products. It allows to make implantation as tool-making method of injection
also.
Lenses, which are maked an special technology, passed experimental and
hospital tests successfully and inculcated in wide surgical practice as in Eye
Microsurgery Intersectoral Research and Technology Complex so in the other
Russian and CIS hospitals.
<PAGE>
- 19 -
1. US patent N 6.286.829 (Russion application N 4745668) "Biocompatible
polymer material and a process for producing same", inventors. S.N. Fedorov,
S.N. Bagrov, A.V. Osipov, E.A. Linnik, I.A. Maklakova. A.N. Kosmynin, E.V.
Larionov, priority 13.10.89, patentee Eye Microsurgery Intersectorial Research
and Technology Complex.
2. Russian patent N 2033165 (Russian application N 474568) "Process for
producing plastic material from collagen", inventors S.N. Fedorov, S.N. Bagrov,
A.V. Osivpov, E.A. Linnik, I.A. Maklakova A.N. Kosmynin, E.V. Larionov, priority
13.10.89, patentee Eye Microsurgery Intersectorial Research and Technology
Complex.
3. USSR Inventors Certificate N 1823178 (Russian application N 4881670)
"Artificial eye lens and process of its implantation in back eye camera",
inventors S.N. Fedorov, V.K. Zuev, B.M. Aznabaev, priority 21.11.80.
4. USA patent N 5258025 (Russian application N 4881670) "correctional
intraocular lens", inventors S.N. Fedorov, V.K. Zuev, B.M. Aznabaev, priority
21.11.80, patentee - Eye Microsurgery Intersectoral Research and Technology
Complex.
5. German laid-open application (Russian application N 4881670)
"Correctional intraocular lens", inventors S.N. Fedorov, B.M. Aznabaev, V.K.
Zuev, priority 22.04.93, patentee - Eye Microsurgery Intersectoral Research and
Technology Complex.
6. Russian patent N 2033114 (Russian application N
<PAGE>
EXHIBIT 10.23
BUSINESS LOAN AGREEMENT
===============================================================================
Borrower: STAAR SURGICAL COMPANY Lender: First Interstate Bank of California
1911 Walker Avenue San Gabriel Corporate Center
Monrovia, CA 91018 1000 E. Garvey Ave. South, Ste. 360
West Covina, CA 91790
===============================================================================
THIS BUSINESS LOAN AGREEMENT between STAAR SURGICAL COMPANY ("Borrower") and
First Interstate Bank of California ("Lender") is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations
from Lender to Borrower, are referred to in this Agreement individually as the
"Loan" and collectively as the "Loans." Borrower understands and agrees that:
(a) in granting, renewing, or extending any Loan, Lender is relying upon
Borrower's representations, warranties, and agreements, as set forth in this
Agreement; (b) the granting, renewing, or extending of any Loan by Lender at
all times shall be subject to Lender's sole judgment and discretion; and (c)
all such Loans shall be and shall remain subject to the following terms and
conditions of this Agreement.
TERM. This Agreement shall be effective as of February 15, 1996, and shall
continue thereafter until all indebtedness of Borrower to Lender has been
performed in full or until February 15, 1997, whichever is later.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
Borrower. The word "Borrower" means STAAR SURGICAL COMPANY. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security interest in any
Collateral for the indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or
hereafter existing, voluntary or involuntary, due or not due, absolute or
contingent, liquidated or unliquidated; whether Borrower may be liable
individually or jointly with others; whether Borrower may be obligated as a
guarantor, surely, or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by an statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means First Interstate Bank of California, its
successors and assigns.
Liquid Assets. The words "Liquid Assets" means Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule attached to this
Agreement from time to time .
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics, warehousemen,
or carriers, or other like liens arising in the ordinary course of business
and securing obligations which are not yet delinquent; (d) purchase money
liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure
indebtedness outstanding on the date of this Agreement or permitted to be
incurred under the paragraph of this Agreement titled "Indebtedness and
Liens"; (e) liens and security interests which, as of the date of this
Agreement, have been disclosed to and approved by the Lender in writing;
and (f) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan
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02-15-1996 BUSINESS LOAN AGREEMENT Page 2
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agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with
the indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
interest.
Security interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement
to indebtedness owed by Borrower to Lender in form and substance acceptable
to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items,
but including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security interests; (d)
evidence of insurance as required below; and (e) any other documents
required under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related
Documents, and such other authorizations and other documents and
instruments as Lender or its counsel, in their sole discretion, may
require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the law of the State of Delaware and
is validly existing and in good standing in all states in which Borrower is
doing business. Borrower has the full power and authority to own its
properties and to transact the businesses in which it is presently engaged
or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its business
or financial condition.
Authorization. The execution, delivery, and performance of this Agreement
and all Related Documents by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower, do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under
(a) any provision of its articles of incorporation or organization, or
bylaws, or any agreement or other instrument binding upon Borrower or
(b) any law, governmental regulation, court decree, or order applicable
to Borrower.
Financial information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable. Borrower owns and has good title to all of
Borrower's properties free and clear of all Security interest, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
Hazardous Substances. The term "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et
seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
Safety Code, Section 25100, et seq., or other applicable state or Federal
Laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and approved by Lender in writing, Borrower
represents and warrants that (a) During the period of Borrower's ownership
of the properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous waste
or substance by any person on, under, or about any of the properties. (b)
Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance by any prior owners
or occupants of any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating to such matters.
(c) Neither Borrower nor any tenant, agent or other authorized user of any
of the properties shall use, generate, manufacture, store, treat, dispose
of, or release any hazardous waste or substance on, under, or about any of
the properties; and any such activity shall be conducted in compliance with
all applicable federal, state, and local laws, regulations, and ordinances,
including without limitation those laws, regulations and ordinances
described above. Borrower authorizes Lender and its agents to enter upon
the properties to make such inspections and tests as Lender may deem
appropriate to determine compliance of the properties with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrower's expense and for Lender's purpose only and shall not be construed
to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein
are based on Borrower's due diligence in investigating the properties for
hazardous waste. Borrower hereby (a) releases and waives any
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02-15-1996 BUSINESS LOAN AGREEMENT Page 3
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future claims against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under any such laws, and
(b) agrees to indemnify and hold harmless Lender against any and all
claims, losses, liabilities, damages, penalties, and expenses which Lender
may directly or indirectly sustain or suffer resulting from a breach of
this section of the Agreement or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties, whether or not
the same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the indebtedness and the termination or expiration
of this Agreement and shall not be affected by Lender's acquisition of any
interest in any of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claims, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and not other event has occurred which
my materially adversely affect Borrower's financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and approved by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly
or indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability compiles in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to
any such plan, (ii) Borrower has not withdrawn from any such plan or
initiated steps to do so, and (iii) no steps have been taken to terminate
any such plan.
Location of Borrower's Offices and Records. Borrower's place of business,
or Borrower's Chief executive office, if Borrower has more than one place
of business, is located at 1911 Walker Avenue, Monrovia, CA 91016. Unless
Borrower has designated otherwise in writing this location is also the
office or offices where Borrower keeps its records concerning the
Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect
until such time as Borrower's indebtedness shall be paid in full, or until
this Agreement shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings
or similar actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or the financial
condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than one hundred twenty (120) days after the end of each fiscal
year, Borrower's balance sheet and income statement for the year ended,
audited by a certified public accountant satisfactory to Lender, and, as
soon as available, but in no event later than sixty (60) days after the end
of each fiscal quarter, Borrower's balance sheet and profit and loss
statement for the period ended, prepared and certified as correct to the
best knowledge and belief by Borrower's chief financial officer or other
officer or person acceptable to Lender. All financial reports required to
be provided under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports
with respect to Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios.
Working Capital. Maintain Working Capital in excess of $11,000.00.
Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be
made in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being
true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with
respect to Borrower's properties and operations, in form, amounts,
coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from
time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will
not be cancelled or diminished without at least ten (10) days' prior
written notice to Lender. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be
impaired in any way by any act, omission or default of Borrower or
any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans,
Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the
name of the issuer; (b) the risks insured; (c) the amount of the policy;
(d) the properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner of determining
those values; and (f) the expiration date of the policy. In addition, upon
request of Lender (however not more often than annually), Borrower will
have an independent appraiser satisfactory to Lender determine, as
applicable, the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether nor or hereafter existing, between Borrower and any
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02-15-1996 BUSINESS LOAN AGREEMENT Page 4
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other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Fees and Charges. In addition to all other agreed upon fees and
charges, pay the following: Borrower agrees to pay Lender, prior to or
contemporaneously with the initial advance of Loan proceeds, a
nonrefundable loan fee in the amount of twelve-thousand five-hundred
dollars ($12,500.00).
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon demand of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely
manner, and promptly notify Lender if Borrower learns of the occurrence of
any event which constitutes an Event of Default under this Agreement or
under any of the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change
in executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable
federal, state and municipal laws, ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including
without limitation, compliance with the Americans With Disabilities Act and
with all minimum funding standards and other requirements of ERISA and
other laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer
software programs for the generation of such records) in the possession of
a third party, Borrower, upon request of Lender, shall notify such party to
permit Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at Borrower's
expense.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause to permit to exist, as a result of an
unintentional action or omission on its part or on the part of any third
party, on property owned and/or occupied by Borrower, any environmental
activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions
of a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons, lien,
citation, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or
omission of Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural
resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or
franchise taxes imposed on Lender), reserve requirements, capital adequacy
requirements or other obligations which would (a) increase the cost to Lender
for extending of maintaining the credit facilities to which this Agreement
relates, (b) reduce the amounts payable to Lender under this Agreement or the
Related Documents, or (c) reduce the rate of return on Lender's capital as a
consequence of Lender's obligations with respect to the credit facilities to
which this Agreement relates, then Borrower agrees to pay Lender such
additional amounts as will compensate Lender therefor, within five (5) days
after Lender's written demand for such payment, which demand shall be
accompanied by an explanation of such imposition or charge and a calculation
in reasonable detail of the
additional amounts payable by Borrower, which explanation and calculations shall
be conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while the
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (b) except as allowed as a Permitted Lien, sell,
transfer, mortgage, assign, pledge, lease, grant a security interest in, or
encumber any of Borrower's assets, or (c) sell with recourse any of
Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, change its name, dissolve or
transfer or sell Collateral out of the ordinary course of business, (c) pay
any dividends on Borrower's stock (other than dividends payable in its
stock), provided, however, that notwithstanding the foregoing, but only so
long as no Event of Default has occurred and is continuing or would result
from the payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended), Borrower may
pay cash dividends on its stock to its shareholders from time to time in
amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal
and state law which arise solely from their status as Shareholders of a
Subchapter S Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding shares of
alter or amended Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other
enterprise or anuity, or (c) incur any obligation as suety or guarnator
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender, or the occurrence of any event or condition which
after notice of time would constitute an Event of Default; (b) Borrower or any
Guarantor becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there a occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing and Loan; or (d) any
Guarantor
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02-15-96 BUSINESS LOAN AGREEMENT PAGE 5
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seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender.
ADDITIONAL DEFINITIONS. The following words shall have the following meanings
when used in this Agreement.
1) Effective Tangible Net Worth - The words "Effective Tangible Net Worth"
mean Borrower's net worth less patents, goodwill, intercompany receivables,
and investments in subsidiaries.
2) Quick Ratio - The words "Quick Ratio" mean Borrower's cash plus equivalents
plus trade receivables (net) divided by total Current Liabilities.
3) Times Fixed Charge Coverage - The words "Times Fixed Charge Coverage" mean
net profit plus depreciation and amortization less non cash income (net non
cash expense) plus tax adjusted interest expense plus tax adjusted rent expense
plus preferred dividends and withdrawals divided by fixed charges.
4) Current Liabilities - The words "Current Liabilities" mean all Borrower's
notes payable plus Borrower's accounts payable plus Borrower's income taxes
payable plus Borrower's accruals plus Borrower's current portion of long term
debt.
ADDITIONAL AFFIRMATIVE CONVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will comply with the
following covenants and ratios:
1) Quick Ratio. Maintain a ratio in excess of 1.20 to 1.00.
2) Times Fixed Charge Coverage. Maintain a ratio in excess of 2.00 to 1.00.
3) Debt to Effective Tangible Net Worth. Maintain a ratio of total liabilities
to Effective Tangible Net Worth of less than 0.60 to 1.00.
4) Minimum Effective Tangible Net Worth. Maintain a minimum Effective Tangible
Net Worth of not less than $23,000.00.
ADDITIONAL AFFIRMATIVE COVENANTS (MEASURED ON AN UNCONSOLIDATED BASIS).
Borrower covenants and agrees with Lender that, while this Agreement is in
effect, Borrower will comply with the following covenants and ratios (to be
tested on an unconsolidated basis for STAAR Surgical Company (USA):
1) Quick Ratio. Maintain a ratio in excess of 0.95 to 1.00.
2) Minimum Effective Tangible Net Worth. Maintain a minimum Effective Tangible
Net Worth of not less than $18,000.00.
OUT OF DEBT PERIOD. Borrower agrees with Lender that borrower shall rest the
loan with no outstanding principal balances for a minimum of thirty (30)
consecutive days during the term of the Loan.
PROFITABILITY REQUIREMENT. Borrower and Lender agree that, while this Agreement
is in effect, Borrower will maintain annual operating profitability.
AGING AND LISTING OF ACCOUNTS RECEIVABLE. Borrower covenants and agrees with
Lender that, while this Agreement is in effect, Borrower shall deliver to
Lender within sixty (60) days after the end of each quarter, a detailed aging
of Borrower's accounts and contracts receivable as of the last day of that
quarter, together with an explanation of any adjustments made at the end of
that quarter, all in a form acceptable to Lender.
INVENTORY CERTIFICATE. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower shall deliver to Lender within sixty (60)
days after the end of each quarter, a detailed summary of the inventory of
Borrower's as of the last day of that quarter, prepared in form acceptable to
Lender.
RESTRICTION ON SPLIT BORROWING. Borrowing and Lender agree that, while this
Agreement is in effect, Borrower will have no split borrowing to any
institution except for leases, purchase money contracts, and existing credit
relationships established in support of the Borrower's foreign subsidiaries.
RESTRICTION ON GUARANTEES. Borrower and Lender agree that, while this Agreement
is in effect, Borrower will not guarantee any obligation of a subsidiary
without prior written approval of Lender, Advances and payables to, and
investments in, subsidiaries can be made within the parameters of the financial
covenants for this facility.
DEPOSIT ACCOUNTS. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on indebtedness. Failure of Borrower to make any payment when due
on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective
obligations under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect at the time made or furnished, or becomes false or misleading at
any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security interest) at any time
and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a receiver
for any part of Borrower's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or any Guarantor dies or
becomes incompetent, or revokes or disputes the validity of, or liability
under, any Guaranty of the indebtedness.
Change in Ownership. Any change in ownership of twenty-five percent (25%)
or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect payment or
<PAGE>
02-15-1996 BUSINESS LOAN AGREEMENT Page 6
(Continued)
================================================================================
performance of the indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement of the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Los
Angeles County, the State of California. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Arbitration.
Binding Arbitration. Upon the demand of any part ("Party/Parties"),
to a Document (as defined below), whether made before the institution
of any judicial proceeding or not more than 60 days after service of
a complaint, third party complaint, cross-claim or counterclaim or
any answer thereto or any amendment to any of the above, any Dispute
(as defined below) shall be resolved by binding arbitration in
accordance with the terms of this arbitration program ("Arbitration
Program"). A "Dispute" shall include any action, dispute, claim or
controversy of any kind, whether founded in contract, tort, statutory
or common law, equity, or otherwise, now existing or hereafter
arising between any of the Parties arising out of, pertaining to or
in connection with any agreement, document or instrument to which
this Arbitration Program is attached or in which it appears or is
referenced or any related agreements, documents, or instruments
("Documents"). Any Party who fails to submit to binding arbitration
following a lawful demand by another Party shall bear all costs and
expenses, including reasonable attorneys' fees (including those
incurred in any trial, bankruptcy proceeding or on appeal), incurred
by the other Party in obtaining a stay of any pending judicial
proceeding and compelling arbitration of any Dispute. The Parties
agree that any agreement, document or instrument which includes,
attaches to or incorporates this Arbitration Program represents a
transaction involving commerce as that term is used in the Federal
Arbitration Act, Title 9 United States Code ("FAA"). THE PARTIES
UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THEIR
DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN
COURT, AND ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE
BROUGHT, FILED OR PURSUED IN COURT.
Governing Rules. Arbitrations conducted pursuant to this Arbitration
Program shall be administered by the American Arbitration Association
("AAA"), or other mutually agreeable administrator ("Administrator")
in accordance with the terms of this Arbitration Program and the
Commercial Arbitration Rules of the AAA. Proceedings hereunder shall
be governed by the provisions of the FAA. The arbitrator(s) shall
resolve all Disputes in accordance with the applicable substantive
law designated in the Documents. Judgement upon any award rendered
hereunder may be entered in any court having jurisdiction; provided,
however, that nothing herein shall be construed to be a waiver by any
Party that is a bank of the protections afforded pursuant to 12
U.S.C.91 or any similar applicable state law.
Arbitrator Powers and Qualifications; Awards. The Parties agree to
select a neutral qualified arbitrator or a panel of three qualified
arbitrators to resolve any Dispute hereunder. "Qualified" means a
retired judge or practicing attorney, with not less than 10 years
practice in commercial law, licensed to practice in the state of the
applicable substantive law designated in the Documents. A Dispute in
which the claims or amounts in controversy do not exceed $1,000,000,
shall be decided by a single arbitrator. A single arbitrator shall
have authority to render an award up to but not to exceed
$1,000,000.00 including all damages of any kind whatsoever, costs,
fees, attorneys' fees and expenses. Submission to a single arbitrator
shall be a waiver of all Parties' claims to recover more than
$1,000,000.00. A Dispute involving claims or amounts in controversy
exceeding $1,000,000.00 shall be decided by a majority vote of a
panel of three qualified arbitrators. All three arbitrators on the
arbitration panel must actively participate in all hearings and
deliberations. The arbitrator(s) shall be empowered to, at the
written request of any Party in any Dispute, (a) to consolidate in a
single proceeding any multiple party claims that are substantially
identical or based upon the same underlying transaction; (b) to
consolidate any claims and Disputes between other Parties which arise
out of or relate to the subject matter hereof, including all claims
by or against borrowers, guarantors, sureties and/or owners of
collateral; and (c) to administer multiple arbitrations claims as
class actions in accordance with Rule 23 of the Federal Rules of
Civil Procedure. In any consolidated proceeding the first
arbitrator(s) selected in any proceeding shall conduct the
consolidated proceeding unless disqualified due to conflict of
interest. The arbitrator(s) shall be empowered to resolve any dispute
regarding the terms of this arbitration clause, including questions
about the arbitrability of any Dispute, but shall have no power to
change or alter the terms of the Arbitration Program. The prevailing
Party in any Dispute shall be entitled to recover its reasonable
attorney's fees in any arbitration, and the arbitrator(s) shall have
the power to award such fees. The award of the arbitrator(s) shall be
in writing and shall set forth the factual and legal basis for the
award.
Real Property Collateral. Notwithstanding the provisions of the
preceding paragraphs concerning arbitration, no Dispute shall be
submitted to arbitration without the consent of all Parties if, at
the time of the proposed submission, such Dispute arises from or
relates to an obligation which is secured directly or indirectly and
in whole or in part by real property collateral. If all Parties do
not consent to submission of such a Dispute to arbitration, the
Dispute shall be determined as provided in the paragraph below
entitled "Judicial Reference".
Judicial Reference. At the request of any Party, a Dispute which is
not submitted to arbitration as provided and limited in the preceding
paragraphs concerning arbitration shall be determined by a reference
in accordance with California Code of Civil Procedure Section 538 et
seq. If such an election is made, the Parties shall designate to the
court a referee or referees selected under the auspices of the AAA,
unless otherwise agreed to in writing by all parties. With respect to
a Dispute in which the amounts in controversy do not exceed
$1,000,000, a single referee shall be chosen and shall resolve the
Dispute. The referee shall have authority to render an award up to
but not to exceed $1,000,000, including all damages of any kind
whatsoever, including costs, fees and expenses. A Dispute involving
amounts in controversy exceeding $1,000,000 shall be decided by a
majority vote of a panel of three referees (a "Referee Panel"),
provided, however, that all three referees on the Referee Panel must
actively participate in all hearings and deliberations. Referees,
including any Referee Panel, may grant any remedy of relief deemed
just and equitable and within the scope of this Arbitration Program
and may also grant such ancillary relief as is necessary to make
effective any award. The presiding referee of the Referee Panel, or
the referee if there is a single referee, shall be a retired judge.
Judgement upon the award rendered by such referee(s) shall be entered
in the court in which such proceeding was commenced in accordance
with California Code of Civil Procedure Sections 644 and 645.
Determinations and awards by a referee or Referee Panel shall be
binding on all Parties and shall not be subject to further review or
appeal except as allowed by applicable law.
Preservation of Remedies. No provision of, nor the excise of any
rights under, this Arbitration Program shall limit the right of any
Party to:
<PAGE>
02-15-1996 BUSINESS LOAN AGREEMENT Page 7
(Continued)
================================================================================
(a) foreclose against and/or sale of any real personal property
collateral or other security, or obtain a personal or deficiency
award: (b) exercise self-help remedies (including/repossession and
setoff rights); or (c) obtain provisional or ancillary remedies such
as injunctive relief, sequestration, attachment, replevin,
garnishment, or the appointment of a receiver from a court having
jurisdiction. Such rights can be exercised at any time except to the
extent such action is contrary to a final award or decision in any
arbitration proceeding. The institution and maintenance of an action
as described above shall not constitute a waiver of the right of any
Party to submit the Dispute to arbitration, nor render inapplicable
the compulsory exercise of any self-help, ancillary or other rights
under this paragraph shall be a Dispute hereunder.
Miscellaneous. All statues of limitation applicable to any Dispute
shall apply to any proceeding in accordance with this Arbitration
Program. The Parties agree, to the maximum extent practicable, to
take any action necessary to conclude an arbitration hereunder within
180 days of the filing of a Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any Party's
failure to proceed within the times established herein. Arbitrations
shall be conducted in the state of the applicable substantive law
designated in the Documents. The provisions of this Arbitration
Program shall service a termination, amendment, or expiration hereof
or of the Documents unless the Parties otherwise, expressly agree in
writing. Each Party agrees to keep all Disputes and arbitration
proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the
Parties or as required by applicable law or regulation. If any
provision of this Arbitration Program is declared invalid by any
court, the remaining provisions shall not be affected thereby and
shall remain fully enforceable.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lander's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated or unrelated to Lender. Lender may provide, without any
limitation whatsoever, to any one or more purchasers, or potential
purchasers, any information or knowledge Lender may have about Borrower or
about any other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation interests,
as well as all notices of any repurchase of such participation interests.
Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in
the Loans and will have all the rights granted under the participation
agreement or agreements covering the sale of such participation interests.
Borrower further waives all rights of offset or counterclaim that it may
have now or later against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either Lender or
such purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any interest in
the Loans. Borrower further agrees that the purchase of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lander's
allocated costs of in-house counsel and expenses, including without
limitation attorneys' fees, incurred in connection with the preparation,
execution, enforcement, modification and collection of this Agreement or in
connection with the Loans made pursuant to this Agreement. Lender may pay
someone else to help collect the Loans and to enforce this Agreement, and
Borrower will pay that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees, and Lender's legal expenses,
whether or not there is a lawsuit, including attorneys' fees for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs in addition in all other
sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimille, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices
under this Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
To the extent permitted by applicable law, if there is more than one
Borrower, notice will constitute notice to all Borrowers. For notice
purposes, Borrower agrees to keep Lender informed at all times of
Borrower's current address(es).
Severability. If a court of competant jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the provision cannot be
so modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Time is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in Exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lander is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required,
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
<PAGE>
02-15-1996 BUSINESS LOAN AGREEMENT Page 8
(Continued)
================================================================================
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
FEBRUARY 15, 1996.
BORROWER:
STAAR SURGICAL COMPANY
By: /s/ William C. Huddleston
----------------------------------------------
William C. Huddleston, Chief Financial Officer
LENDER:
First Interstate Bank of California
By: [Signature Appears Here]
----------------------------------------------
Authorized Officer Vice President
================================================================================
<PAGE>
[LOGO OF FIRST INTERSTATE EXHIBIT 10.24
BANK APPEARS HERE]
COMMERCIAL SECURITY AGREEMENT
================================================================================
Borrower: STAAR SURGICAL COMPANY Lender: First Interstate Bank
1911 Walker Avenue of California
Monrovia, CA 91018 San Gabriel Corporate Center
1000 E. Garvey Ave. South,
Ste. 360
West Covina, CA 91790
================================================================================
THIS COMMERCIAL SECURITY AGREEMENT is entered into between STARR SURGICAL
COMPANY (referred to below as "Grantor"); and First Interstate Bank of
California (referred to below as "Lender"). For valuable consideration, Grantor
hereby grants, conveys, assigns, and pledges to Lender as collateral, a
security interest in Grantor's entire interest in the Collateral, whether now
existing or hereafter acquired, to secure the indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word "Agreement" means this Commercial Security Agreement, as
the Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to the Commercial
Security Agreement from time to time.
Collateral. The word "Collateral" means the following described property of
Grantor, whether now owned or hereafter acquired, whether now existing or
hereafter arising, and wherever located:
All inventory, accounts, chattel paper and general intangibies.
In addition, the word "Collateral" means the following, whether now owned or
hereafter acquired, whether now existing or hereafter arising, and wherever
located:
(a) All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions
for any property described above.
(b) All products and produce of any of the property described in this
Collateral section.
(c) All accounts, contract rights, general intangibles, instruments,
rents, monies, payments, and all other rights, arising out of a sale,
lease, or other disposition of any of the property described in
this Collateral section.
(d) All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described
in this Collateral Section.
(e) All records and data relating to any of the property described in
this Collateral section, whether in the form of a writing, photograph,
microfilm, microfische, or electronic media, together with all of
Grantor's right, title, and interest in and to all computer software
required to utilize, create, maintain, and process any such records or
data on electronic media.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section
titled "Events of Default."
Grantor. The word "Grantor" means STAAR SURGICAL COMPANY, its successors and
assigns.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with the indebtedness.
Indebtedness. The word "Indebtedness" means the indebtedness evidenced by
the Note, including all principal and interest, together with all other
indebtedness and costs and expenses for which Grantor is responsible under
this Agreement or under any of the Related Documents. In addition, the word
"Indebtedness" includes all other obligations, debts and liabilities, plus
interest thereon, of Grantor, or any one or more of them, to Lender, as well
as all claims by Lender against Grantor, or any one or more of them, whether
existing now or later; whether they are voluntary or involuntary, due or
not due, direct or indirect, absolute or contingent, liquidated or
unliquidated; whether Grantor may be liable individually or jointly with
others; whether Grantor may be obligated as guarantor, surety,
accommodation party or otherwise; whether recovery upon such indebtedness
may be or hereafter may become barred by any statute of limitations; and
whether such indebtedness may be or hereafter may become otherwise
unenforceable.
Lender. The word "Lender" means First Interstate Bank of California, its
successors and assigns.
Note. The word "Note" means the note or credit agreement dated February 15,
1996, in the principal amount of $5,000,000.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of, refinancings
of, consolidations of and substitutions for the note or credit agreement.
Related Documents. The words "Related Documents" mean and include without
limitation all promissary notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now
or hereafter existing, executed in connection with the indebtedness.
DEPOSIT ACCOUNTS. Grantor hereby grants Lender a contractual possessory
security interest in and hereby assigns, conveys, delivers, pledges, and
transfers all of Grantor's right, title and interest in and to Grantor's
accounts with Lender (whether checking, savings, or some other account),
including all accounts held jointly with someone else and all accounts
Grantor may open in the future, excluding however all IRA, Keogh, and trust
accounts.
OBLIGATIONS OF GRANTOR. Grantor warrants and covenants to Lender as follows:
Perfection of Security interest. Grantor agrees to execute such financing
statements and to take whatever other actions are requested by Lender to
perfect and continue Lender's security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the
documents evidencing or constituting the Collateral, and Grantor will note
Lender's interest upon any and all chattell paper if not delivered to Lender
for possession by Lender. Grantor hereby appoints Lender as its irrevocable
attorney-in-fact for the purpose of executing any
<PAGE>
02-15-1996 COMMERCIAL SECURITY AGREEMENT Page 2
(Continued)
================================================================================
documents necessary to perfect or to continue the security interest granted
in this Agreement. Lender may at any time, and without further
authorization from Grantor, file a carbon, photographic or other
reproduction of any financing statement or of this Agreement for use as a
financing statement. Grantor will reimburse Lender for all expenses for the
perfection and the continuation of the perfection of Lender's security
interest in the Collateral. Grantor promptly will notify Lender before any
change in Grantor's name including any change to the assumed business names
of Grantor. This is a continuing Security Agreement and will continue in
effect even though all or any part of the indebtedness is paid in full and
even though for a period of time Grantor may not be indebted to Lender.
No Violation. The execution and delivery of this Agreement will not violate
any law or agreement governing Grantor or to which Grantor is a party, and
its certificate or articles of incorporation and bylaws do not prohibit any
term or condition of this Agreement.
Enforceability of Collateral. To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, the Collateral is
enforceable in accordance with its terms, is genuine, and complies with
applicable laws concerning form, content, and manner of preparation and
execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear
to be on the Collateral. At the time any account becomes subject to a
security interest in favor of Lender, the account shall be a good and valid
account representing an undisputed bona fide indebtedness incurred by the
account debtor, for merchandise held subject to delivery instructions or
theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by Grantor with or for the account debtor;
there shall be no setoffs or counterclaims against any such account, and no
agreement under which any deductions or discounts may be claimed shall have
been made with the account debtor except those disclosed to Lender in
writing.
Location of the Collateral. Grantor, upon request of Lender, will deliver
to Lender in form satisfactory to Lender a schedule of real properties and
Collateral locations relating to Grantor's operations, including without
limitation the following: (a) all real property owned or being purchased
by Grantor; (b) all real property being rented or leased by Grantor;
(c) all storage facilities owned, rented, leased or being used by Grantor;
and (d) all other properties where Collateral is or may be located. Except
in the ordinary course of its business, Grantor shall not remove the
Collateral from its existing locations without prior written consent of
Lender.
Removal of Collateral. Grantor shall keep the Collateral (or to the extent
the Collateral consists of intangible property such as accounts, the
records concerning the Collateral) at Grantor's address shown above, or at
such other locations as are acceptable to Lender. Except in the ordinary
course of its business, including the sales of inventory, Grantor shall not
remove the Collateral from its existing locations without the prior written
consent of Lender. To the extent that the Collateral consists of vehicles,
or other titled property, Grantor shall not take or permit any action
which would require application for certificates of title for the vehicles
outside the State of California, without the prior written consent of
Lender.
Transactions involving Collateral. Except for inventory sold or accounts
collected in the ordinary course of Grantor's business, Grantor shall not
sell, offer to sell, or otherwise transfer or dispose of the Collateral.
While Grantor is not in default under this Agreement, Grantor may sell
inventory, but only in the ordinary course of its business and only to
buyers who qualify as a buyer in the ordinary course of business. A sale
in the ordinary course of Grantor's business does not include a transfer in
partial or total satisfaction of a debt or any bulk sale. Grantor shall not
pledge, mortgage, encumber or otherwise permit the Collateral to be subject
to any lien, security interest, encumbrance or charge, other than the
security interests granted under this Agreement. Unless waived by Lender,
all proceeds from any disposition of the Collateral (for whatever reason)
shall be held in trust for Lender and shall not be commingled with any
other funds; provided however, this requirement shall not constitute
consent by Lender to any sale or other disposition. Upon receipt, Grantor
shall immediately deliver any such proceeds to Lender.
Title. Grantor represents and warrants to Lender that it holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except to the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than
those which reflect the security interest created by this Agreement or to
which Lender has specifically consented. Grantor shall defend Lender's
rights in the collateral against the claims and demands of all other
persons.
Collateral Schedules and Locations. As often as Lender shall require, and
insofar as the Collateral consists of accounts and general intangibles,
Grantor shall deliver to Lender schedules of such Collateral, including
such information as Lender may require. Including without limitation names
and addresses of account debtors and agings of accounts and general
intangibles. Insofar as the Collateral consists of inventory, Grantor shall
deliver to Lender, as often as Lender shall require, such lists,
descriptions, and designations of such Collateral as Lender may require to
identify the nature, extent, and location of such Collateral. Such
information shall be submitted for Grantor and each of its subsidiaries or
related companies.
Maintenance and inspection of Collateral. Grantor shall maintain all
tangible Collateral in good condition and repair. Grantor will not commit
or permit damage to or destruction of the Collateral or any part of the
Collateral. Lender and its designated representatives and agents shall have
the right at all reasonable times to examine, inspect, and audit the
Collateral wherever located. Grantor shall immediately notify Lender of
all cases involving the return, rejection, repossession, loss or damage of
or to any Collateral; of any request for credit or adjustment or of any
other dispute arising with respect to the Collateral; and generally of all
happenings and events affecting the Collateral or the value or the amount
of the Collateral.
Taxes, Assessments and Liens. Grantor will pay when due all taxes,
assessments and liens upon the Collateral, its use or operation, upon this
Agreement, upon any promissory note or notes evidencing the indebtedness,
or upon any of the other Related Documents. Grantor may withhold any such
payment or may select to contest any lien if Grantor is in good faith
conducting an appropriate proceeding to contest the obligation to pay and
so long as Lender's interest in the Collateral is not jeopardized in
Lender's sole opinion. If the Collateral is subjected to a lien which is
not discharged within fifteen (15) days, Grantor shall deposit with Lender
cash, a sufficient corporate surety bond or other security satisfactory to
Lender in an amount adequate to provide for the discharge of the lien plus
any interest, costs, attorneys' fees or other charges that could accrue as
a result of foreclosure or sale of the Collateral. In any contest Grantor
shall defend itself and Lender shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an
additional obligee under any surety bond furnished in the contest
proceedings.
Compliance With Governmental Requirements. Grantor shall comply promptly
with all laws, ordinances, rules and regulations of all governmental
authorities, now or hereafter in affect, applicable to the ownership,
production, disposition, or use of the Collateral. Grantor may contest in
good faith any such law, ordinance or regulation and withhold compliance
during any proceeding, including appropriate appeals, so long as Lender's
interest in the Collateral, in Lender's opinion, is not jeopardized.
Hazardous Substances. Grantor represents and warrants that the Collateral
never has been, and never will be so long as this Agreement remains a lien
on the Collateral, used for the generation, manufacture, storage,
transportation, treatment, disposal, release or threatened release of any
hazardous waste or substance, as those terms are defined in the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials, Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act, 49 U.S.C. Section 6901,
et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health
and Safety Code, Section 25100, et seq., or other applicable state or
Federal laws, rules, or regulations adopted pursuant to any of the
foregoing. The terms "hazardous waste" and "hazardous substance" shall also
include, without limitation, petroleum and petroleum by-products or any
fraction thereof and asbestos. The representations
<PAGE>
02-15-1996 PAGE 3
COMMERCIAL SECURITY AGREEMENT
(Continued)
================================================================================
and warranties contained herein are based on Grantor's due diligence in
investigating the Collateral for hazardous wastes and substances. Grantor
hereby (a) releases and waives any future claims against Lender for
indemnity or contribution in the event Grantor becomes liable for cleanup
or other costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims and losses resulting from a
breach of this provision of this Agreement. The obligation to indemnify
shall survive the payment of the indebtedness and the satisfaction of this
Agreement.
Maintenance of Casualty Insurance. Grantor shall procure and maintain all
risks insurance, including without limitation fire, theft and liability
coverage together with such other insurance as Lender may require with
respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably
acceptable to Lender. Grantor, upon request of Lender, will deliver to
Lander from time to time the policies or certificates of insurance in term
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days' prior written
notice to Lender and not including any disclaimer of the insurer's
liability for failure to give such a notice. Each Insurance policy also
shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Grantor
or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest, Grantor will provide
Lender with such less payable or other endorsements as Lender may require.
If Grantor at any time fails to obtain or maintain any insurance as
required under this Agreement, Lender may (but shall not be obligated to)
obtain such insurance as Lender deems appropriate, including if it so
chooses "single interest insurance," which will cover only Lender's
interest in the Collateral.
Application of Insurance Proceeds. Grantor shall promptly notify Lender of
any loss or damage to the Collateral. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All
proceeds of any insurance on the Collateral, including accrued proceeds
thereon, shall be held by Lender as part of the Collateral. If Lender
consents to repair or replacement of the damaged or destroyed Collateral,
Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration.
If Lender does not consent to repair or replacement of the Collateral.
Lender shall retain a sufficient amount of the proceeds to pay all of the
indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which
Grantor has not committed to the repair or restoration of the Collateral
shall be used to prepay the indebtedness.
Insurance Reserves: Lender may require Grantor to maintain with Lender
reserves for payment of insurance premiums, which reserves shall be created
by monthly payments from Grantor of a sum estimated by Lender to be
sufficient to produce, at least fifteen (15) days before the premium due
date, amounts at least equal to the insurance premiums to be paid. If
fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The
reserve funds shall be held by Lender as a general deposit and shall
constitute a non-interest-bearing account which Lender may satisfy by
payment of the insurance premiums required to be paid by Grantor as they
become due. Lender does not hold the reserve funds in trust for Grantor,
and Lender is not the agent of Grantor for payment of the insurance
premiums required to be paid by Grantor. The responsibility for the payment
of premiums shall remain Grantor's sole responsibility.
Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as
Lender may reasonably request including the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
property insured; (e) the then current value on the basis of which
insurance has been obtained and the manner of determining that value; and
(f) the expiration date of the policy. In addition, Grantor shall upon
request by Lender (however not more often than annually) have an
independent appraiser satisfactory to Lender determine, as applicable, the
cash value or replacement cost of the Collateral.
GRANTOR'S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantor's right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lender's security interest in
such Collateral. Until otherwise notified by Lender, Grantor may collect any of
the Collateral consisting of accounts. At any time and even though no Event of
Default exists, Lender may exercise its rights to collect the accounts and to
notify account debtors to make payments directly to Lender for application to
the indebtedness. If Lender at any time has possession of any Collateral,
whether before or after an Event of Default, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral if
Lender takes such action for that purpose as Grantor shall request or as Lender,
in Lender's sole discretion, shall deem appropriate under the circumstances, but
failure to honor any request by Grantor shall not of itself be deemed to be a
failure to exercise reasonable care. Lender shall not be required to take any
steps necessary to preserve any rights in the Collateral against prior parties,
nor to protect, preserve or maintain any security interest given to secure the
indebtedness.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral. Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral. All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor. All such
expenses shall become a part of the indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity. This Agreement also will secure payment
of these amounts. Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement.
Default on indebtedness. Failure of Grantor to make any payment when due on
the indebtedness.
Other Defaults. Failure of Grantor to comply with or to perform any other
term, obligation, covenant or condition contained in this Agreement or in
any of the Related Documents or in any other agreement between Lender and
Grantor.
Insolvency. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or against Grantor.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral securing
the indebtedness. This includes a garnishment of any of Grantor's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the indebtedness or such Guarantor dies or
becomes incompetent.
Adverse Change. A material adverse change occurs in Grantor's financial
condition, or Lender believes the prospect of payment of performance of the
indebtedness is impaired.
RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a secured
party under the California Uniform Commercial Code. In addition and without
limitation, Lender may exercise any one or more of the following rights and
remedies:
<PAGE>
Accelerate Indebtedness. Lender may declare the entire indebtedness,
including any prepayment penalty which Grantor would be required to pay,
immediately due and payable, without notice.
Assemble Collateral. Lender may require Grantor to deliver to Lender all or
any portion of the Collateral and any and all certificates of title and
other documents relating to the Collateral. Lender may require Grantor to
assemble the Collateral and make it available to Lender at a place to be
designated by Lender. Lender also shall have full power to enter upon the
property of Grantor to take possession of and remove the Collateral. If the
Collateral contains other goods not covered by this Agreement at the time
of repossession, Grantor agrees Lender may take such other goods, provided
that Lender makes reasonable efforts to return them to Grantor after
repossession.
Sell the Collateral. Lender shall have full power to sell, lease, transfer,
or otherwise deal with the Collateral or proceeds thereof in its own name
or that of Grantor. Lender may sell the Collateral at public auction or
private sale. Unless the Collateral threatens to decline speedily in value
or is of a type customarily sold on a recognized market, Lender will give
Grantor reasonable notice of the time after which any private sale or any
other intended disposition of the Collateral is to be made. The
requirements of reasonable notice shall be met if such notice is given at
least ten (10) days, or such lesser time as required by state law, before
the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of
retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the indebtedness secured by this
Agreement and shall be payable on demand, with interest at the Note rate
from date of expenditure until repaid.
Appoint Receiver. To the extent permitted by applicable law, Lender shall
have the following rights and remedies regarding the appointment of a
receiver: (a) Lender may have a receiver appointed as a matter of right,
(b) the receiver may be an employee of Lender and may serve without bond,
and (c) all fees of the receiver and his or her attorney shall become part
of the indebtedness secured by this Agreement and shall be payable on
demand, with interest at the Note rate from date expenditure until repaid.
Collect Revenues, Apply Accounts. Lender, either itself or through a
receiver, may collect the payments, rents, income, and revenues from the
Collateral. Lender may at any time in its discretion transfer any
Collateral into its own name or that of the nominee and receive the
payments, rents, income and revenues therefrom and hold the same as
security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the
Collateral consists of accounts, general intangibles, insurance policies,
instruments, chattel paper, choses in action or similar property. Lender
may demand, collect, receipt for, settle, compromise, adjust, sue for,
foreclose, or realize on the Collateral as Lender may determine, whether or
not Indebtedness or Collateral is then due. For these purposes, Lender may,
on behalf of and in the name of Grantor, receive, open and dispose of mail
addressed to Grantor, change any address to which mail and payments are to
be sent; and endorse notes, checks, drafts, money orders, documents of
title, instruments and items pertaining to payment, shipment, or storage of
any Collateral. To facilitate collection, Lender may notify account debtors
and obligors on any Collateral to make payments directly to Lender.
Obtain Deficiency. If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining
on the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in the Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this
subsection is a sale of accounts or chattel paper.
Other Rights and Remedies. Lender shall have all the rights and remedies of
a secured creditor under the provisions of the Uniform Commercial Code, as
may be amended from time to time. In addition, Lender shall have and may
exercise any or all other rights and remedies it may have available at law,
in equity, or otherwise.
Cumulative Remedies. All of Lender's rights and remedies, whether evidenced
by the Agreement or the Related Documents or by any other writing shall be
cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy,
and an election to make expenditures or to take action to perform an
obligation of Grantor under this Agreement after Grantor's failure to
perform, shall not affect Lender's right to declare a default and to
exercise its remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the
party or parties sought to be charged or bound by the alteration or
amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Grantor agrees
upon Lender's request to submit to the jurisdiction of the courts of Los
Angeles County, State of California. Subject to the provisions on
arbitration, this Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Arbitration
Binding Arbitration. Upon the demand of any party ("Party/ Parties")/
to a Document (as defined below), whether made before the Institution
of any judicial proceeding or not more than 60 days after service of
a complaint, third party complaint, cross-claim or counterclaim or
any answer thereto or any amendment to any of the above, any Dispute
(as defined below) shall be resolved by binding arbitration in
accordance with the terms of this arbitration program ("Arbitration
Program"). A "Dispute" shall include any action, dispute, claim or
controversy of any kind, whether founded in contract, tort, statutory
or common law, equity, or otherwise, now existing or hereafter
arising between any of the Parties arising out of, pertaining to or
in connection with any agreement, document or instrument to which
this Arbitration Program is attached or in which it appears or is
referenced or any related agreements, documents, or instruments
("Documents"). Any Party who fails to submit to binding arbitration
following a lawful demand by another Party shall bear all costs and
expenses, including reasonable attorneys' fees (including those
incurred in any trial, bankruptcy proceeding or on appeal). Incurred
by the other Party in obtaining a stay of any pending judicial
proceeding and compelling arbitration of any Dispute. The Parties
agree that any agreement, document or instrument which includes,
attaches to or incorporates this Arbitration Program represents a
transaction involving commerce as that term is used in the Federal
Arbitration Act, Title 9 United States Code ("FAA"). THE PARTIES
UNDERSTAND THAT BY THIS AGREEMENT THEY HAVE DECIDED THAT THEIR
DISPUTES SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN
COURT, AND ONCE DECIDED BY ARBITRATION NO DISPUTE CAN LATER BE
BROUGHT, FILED OR PURSUED IN COURT.
Governing Rules. Arbitrations conducted pursuant to this Arbitration
Program shall be administered by the American Arbitration Association
("AAA"), or other mutually agreeable administrator ("Administrator")
in accordance with the terms of this Arbitration Program and the
Commercial Arbitration Rules of the AAA. Proceedings hereunder shall
be governed by the provisions of the FAA. The arbitrator(s) shall
resolve all Disputes in accordance with the applicable substantive
law designated in the Documents. Judgment upon any award rendered
hereunder may be entered in any court having jurisdiction; provided,
however, that nothing herein, shall be construed to be a waiver by
any Party that is a bank of the protections afforded pursuant to 12
U.S.C. 91 or any similar applicable state law.
Arbitrator Powers and Qualifications; Awards. The Parties agree to
select a neutral qualified arbitrator or a panel of three qualified
arbitrators to resolve any Dispute hereunder. "Qualified" means a
retired judge or practicing attorney, with not less that 10 years
practice in commercial law, licensed to practice in the state of the
applicable substantive law designated in the Documents. A Dispute in
which the claims or amounts in controversy do not exceed
$1,000,000.00 shall be decided by a single arbitrator. A single
arbitrator shall have authority to render an award up to but not to
exceed $1,000,000 including all damages of any kind whatsoever,
costs, fees, attorneys fees and
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02-15-1996 COMMERCIAL SECURITY AGREEMENT Page 5
(Continued)
================================================================================
expenses. Submission to a single arbitrator shall be a waiver of all
Parties' claims to recover more than $1,000,000.00. A Dispute
involving claims or amounts in controversy exceeding $1,000,000.00
shall be decided by a majority vote of a panel of three qualified
arbitrators. All three arbitrators on the arbitration panel must
actively participate in all hearings and deliberations. The
arbitrator(s) shall be empowered to, at the written request of any
Party in any Dispute, (a) to consolidate in a single proceeding any
multiple party claims that are substantially identical or based upon
the same underlying transaction; (b) to consolidate any claims and
Disputes between other Parties which arise out of or relate to the
subject matter hereof, including all claims by or against borrowers,
guarantors, sureties and/or owners of collateral; and (c) to
administer multiple arbitration claims as class actions in accordance
with Rule 23 of the Federal Rules of Civil Procedure. In any
consolidated proceeding the first arbitrator(s) selected in any
proceeding shall conduct the consolidated proceeding unless
disqualified due to conflict of interest. The arbitrator(s) shall be
empowered to resolve any dispute regarding the terms of this
arbitration clause, including questions about the arbitrability of any
Dispute, but shall have no power to change or alter the terms of the
Arbitration Program. The prevailing Party in any Dispute shall be
entitled to recover its reasonable attorneys' fees in any
arbitration, and the arbitrator(s) shall have the power to award such
fees. The award of the arbitrator(s) shall be in writing and shall set
forth the factual and legal basis for the award.
Real Property Collateral. Notwithstanding the provisions of the
preceding paragraphs concerning arbitration, no Dispute shall be
submitted to arbitration without the consent of all Parties if, at the
time of the proposed submission, such Dispute arises from or relates
to an obligation which is secured directly or indirectly and in whole
or in part by real property collateral. If all Parties do not consent
to submission of such a Dispute to arbitration, the Dispute shall be
determined as provided in the paragraph below entitled "Judicial
Reference".
Judicial Reference. At the request of any Party, a Dispute which is
not submitted to arbitration as provided and limited in the preceding
paragraphs concerning arbitration shall be determined by a reference
in accordance with California Code of Civil Procedure Section 838 et
seq. If such an election is made, the Parties shall designate to the
court a referee or referees selected under the auspices of the AAA,
unless otherwise agreed to in writing by all parties. With respect to
a Dispute in which the amounts in controversy do not exceed
$1,000,000, a single referee shall be chosen and shall resolve the
Dispute. The referee shall have authority to render an award up to but
not to exceed $1,000,000, including all damages of any kind
whatsoever, including costs, fees and expenses. A Dispute involving
amounts in controversy exceeding $1,000,000 shall be decided by a
majority vote of a panel of three referees (a "Referee Panel"),
provided, however, that all three referees on the Referee Panel must
actively participate in all hearings and deliberations. Referees,
including any Referee Panel, may grant any remedy of relief deemed
just and equitable and within the scope of this Arbitration Program
and may also grant such ancillary relief as is necessary to make
effective any award. The presiding referee of the Referee Panel, or
the referee if there is a single referee, shall be a retired judge.
Judgment upon the award rendered by such referee(s) shall be entered
in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 844 and 845.
Determinations and awards by a referee or Referee Panel shall be
binding on all Parties and shall not be subject to further review or
appeal except as allowed by applicable law.
Preservation of Remedies. No provision of, nor the excise of any
rights under, this Arbitration Program shall limit the right of any
Party to: (a) foreclose against and /or sale of any real or personal
property collateral or other security, or obtain a personal or
deficiency award: (b) exercise self-help remedies (including
repossession and setoff rights): or (c) obtain provisional or
ancilliary remedies such as injunctive relief, sequestration,
attachment, replevin, garnishment, or the appointment of a receiver
from a court having jurisdiction. Such rights can be exercised at any
time except to the extent such action is contrary to a final award or
decision in any arbitration proceeding. The institution and
maintenance of an action as described above shall not constitute a
waiver of the right of any party to submit the Dispute to arbitration,
nor render inapplicable the compulsory exercise of any self-help,
auxiliary or other rights under this paragraph shall be a Dispute
hereunder.
Miscellaneous. All statutes of limitation applicable to any Dispute
shall apply to any proceeding in accordance with this Arbitration
Program. The Parties agree, to the maximum extent practicable, to take
any action necessary to conclude an arbitration hereunder within 180
days of the filing of a Dispute with the Administrator. The
arbitrator(s) shall be empowered to impose sanctions for any Party"s
failure to proceed within the times established herein. Arbitrations
shall be conducted in the state of the applicable substantive law
designated in the Documents. The provisions of this Arbitration
Program shall survive a termination, amendment, or expiration hereof
or of the Documents unless the Parties otherwise expressly agree in
writing. Each Party agrees to keep all Disputes and arbitration
proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties
or as required by applicable law or regulation. If any provision of
this Arbitration Program is declared invalid by any court, the
remaining provisions shall not be affected thereby and shall remain
fully enforceable.
Attorneys' Fees; Expenses. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's legal
expenses, incurred in connection with the enforcement of this Agreement.
Lender may pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lender's attorneys' fees and legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (and including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection
services. Grantor also shall pay all court costs and such additional fees
as may be directed by the court.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the Borrowers
signing below is responsible for all obligations in this Agreement.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimille, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be given
at the address shown above. Any party may change its address for notices
under this Agreement by filing formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's address.
To the extent permitted by applicable law, if there is more than one
Grantor, notice to any Grantor will constitute notice to all Grantors. For
notice purposes, Grantor agrees to keep Lender informed at all times of
Grantor's current address(es).
Power of Attorney. Grantor hereby appoints Lender as its true and lawful
attorney-in-fact, irrevocably, with full power of substitution to do the
following: (a) to demand, collect, receive, receipt for, sue and recover
all sums of money or other property which may now or hereafter become due,
owing or payable from the Collateral: (b) to execute, sign and endorse any
and all claims, instruments, receipts, checks, drafts or warrants issued in
payment for the Collateral: (c) to settle or compromise any and all claims
arising under the Collateral, and, in the place and stead of Grantor, to
execute and deliver its release and settlement for the claim; and (d) to
file any claim or to take any action or institute or take part in any
proceedings, either in its own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable. This power is given as security for the indebtedness, and the
authority hereby conferred is and shall be irrevocable and shall remain in
full force and effect until renounced by Lender.
Preference Payments. Any monies Lender pays because of an asserted
preference claim in Borrower's bankruptcy will become a part of the
indebtedness and, at Lender's option, shall be payable by Borrower as
provided above in the "EXPENDITURES BY LENDER" paragraph.
<PAGE>
02-15-1996 COMMERCIAL SECURITY AGREEMENT Page 6
(continued)
================================================================================
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
Successor Interests. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the parties, their successors and assigns.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Grantor, shall constitute a waiver of
any of Lender's rights or of any of Grantor's obligations as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance shall not
constitute continuing consent to subsequent instances where such consent is
required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.
Waiver of Co-obligor's Rights. If more than one person is obligated for the
indebtedness, Borrower irrevocably waives, disclaims and relinquishes all
claims against such other person which Borrower has or would otherwise have
by virtue of payment of the indebtedness or any part thereof, specifically
including but not limited to all rights of indemnity, contribution or
exoneration.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT, AND GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
FEBRUARY 15, 1996.
GRANTOR:
STAAR SURGICAL COMPANY
By: /s/ William C. Huddleston
------------------------------------------------
William C. Huddleston, Chief Financial Officer
================================================================================
LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver, 3.19A (C) 1996 CFI ProServices, Inc.
All rights reserved, [CA-E40 E2.19 STAARS.LN C2.QVL]
<PAGE>
EXHIBIT 10.25
WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE
- --------------------------------------------------------------------------------
$5,000,000.00 El Monte, California
December 2, 1996
FOR VALUE RECEIVED, the undersigned STAAR SURGICAL COMPANY ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at Flair Industrial Park RCBO, 9000 Flair Drive Suite 100, El
Monte, CA 91731, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of $5,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.
DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each, and any other term defined in this Note shall have the meaning set forth
at the place defined:
(a) "Business Day" means any day except a Saturday, Sunday or any other
day on which commercial banks in California are authorized or required by law to
close.
(b) "Fixed Rate Term" means a period commencing on a Business Day and
continuing for 1, 2, 3 or 6 months, as designated by Borrower, during which all
or a portion of the outstanding principal balance of this Note bears interest
determined in relation to LIBOR; provided however, that no Fixed Rate Term may
be selected for a principal amount less than $500,000.00; and provided further,
that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof.
If any Fixed Rate Term would end on a day which is not a Business Day, then such
Fixed Rate Term shall be extended to the next succeeding Business Day.
(c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal
to 100% less any LIBOR Reserve Percentage.
(i) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of
the Inter-Bank Market as Bank in its discretion deems appropriate including, but
not limited to, the rate offered for U.S. dollar deposits on the London Inter-
Bank Market.
(ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
"Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable Fixed Rate Term.
(d) "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office as its Prime Rate, with the
understanding that the Prime Rate is one of Bank's base rates and serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto, and is evidenced by the recording thereof after its
announcement in such internal publication or publications as Bank may designate.
INTEREST:
(a) Interest. The outstanding principal balance of this Note shall bear
--------
interest (computed on the basis of a 360-day year, actual days elapsed) either
(i) at a fluctuating rate per annum equal to the Prime Rate in effect from time
to time, or (ii) at a fixed rate per annum determined by Bank to be 1.75000%
above LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate of
interest hereunder shall become effective on the date each Prime Rate change is
announced within Bank. With respect to each LIBOR selection option selected
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.
(b) Selection of Interest Rate Options. At any time any portion of this
----------------------------------
Note bears interest determined in relation to LIBOR, it may be continued by
Borrower at the end of the Fixed Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Prime Rate or to
LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion
of this Note bears interest determined in relation to the Prime Rate, Borrower
may convert all or a portion thereof so that it bears interest determined in
relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as
Borrower requests an advance hereunder or wishes to select a LIBOR option for
all or a portion of the outstanding principal balance hereof, and at the end of
each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the
interest rate option selected by Borrower; (ii) the
Revolving Line of Credit Note (08/96), Page 1
<PAGE>
principal amount subject thereto; and (iii) for each LIBOR selection, the length
of the applicable Fixed Rate Term. Any such notice may be given by telephone so
long as, with respect to each LIBOR selection, (A) Bank receives written
confirmation from Borrower not later than 3 Business Days after such telephone
notice is given, and (B) such notice is given to Bank prior to 10:00 a.m.,
California time, on the first day of the Fixed Rate Term. For each LIBOR option
requested hereunder, Bank will quote the applicable fixed rate to Borrower at
approximately 10:00 a.m., California time, on the first day of the Fixed Rate
Term. If Borrower does not immediately accept the rate quoted by Bank, any
subsequent acceptance by Borrower shall be subject to a redetermination by Bank
of the applicable fixed rate; provided however, that if Borrower fails to accept
any such rate by 11:00 a.m., California time, on the Business Day such quotation
is given, then the quoted rate shall expire and Bank shall have no obligation to
permit a LIBOR option to be selected on such day. If no specific designation of
interest is made at the time any advance is requested hereunder or at the end of
any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest
selection for such advance or the principal amount to which such Fixed Rate Term
applied.
(c) Additional LIBOR Provisions.
---------------------------
(i) If Bank at any time shall determine that for any reason adequate
and reasonable means do not exist for ascertaining LIBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until such
notice has been withdrawn by Bank, then (A) no new LIBOR option may be selected
by Borrower, and (B) any portion of the outstanding principal balance hereof
which bears interest determined in relation to LIBOR, subsequent to the end of
the Fixed Rate Term applicable thereto, shall bear interest determined in
relation to the Prime Rate.
(ii) If any law, treaty, rule, regulation or determination of a court
or governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(A) to make LIBOR options available hereunder, or (B) to maintain interest rates
based on LIBOR, then in the former event, any obligation of Bank to make
available such awful LIBOR options shall immediately be cancelled, and in the
latter event, any such unlawful LIBOR-based interest rates then outstanding
shall be converted, at Bank's option, so that interest on the portion of the
outstanding principal balance subject thereto is determined in relation to the
Prime Rate; provided however, that if any such Change in Law shall permit any
LIBOR-based interest rates to remain in effect until the expiration of the Fixed
Rate Term applicable thereto, then such permitted LIBOR-based interest rates
shall continue in effect until the expiration of such Fixed Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate Bank for
any fines, fees, charges, penalties or other costs incurred or payable by Bank
as a result thereof and which are attributable to any LIBOR options made
available to Borrower hereunder, and any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.
(iii) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(A) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank
of principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(B) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank;
or
(C) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such LIBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any LIBOR options made available
to Borrower hereunder, any reasonable allocation made by Bank among its
operations shall be conclusive and binding upon Borrower.
(d) Payment of Interest. Interest accrued on this Note shall be payable
-------------------
on the 1ST day of each MONTH, commencing JANUARY 1, 1997.
BORROWING AND REPAYMENT:
(a) Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for any Borrower, which balance may be endorsed hereon from time to time
by the holder. The outstanding principal balance of this Note shall be due and
payable in full on JUNE 1, 1997.
(b) Advances. Advances hereunder, to the total amount of the principal
--------
sum available hereunder, may be made by the holder at the oral or written
request of (i) WILLIAM C. HUDDLESTON or JOHN R. WOLF or JOHN
<PAGE>
SANTOS or DEBORAH ANDREWS, any one acting alone, who are authorized to request
advances and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the credit of
any account of any Borrower with the holder, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of each
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an advance
is or has been authorized by any Borrower.
(c) Application of Payment. Each payment made on this Note shall be
----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof. All payments credited to principal shall be applied
first, to the outstanding principal balance of this Note which bears interest
determined in relation to the Prime Rate, if any, and second, to the outstanding
principal balance of this Note which bears interest determined in relation to
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
PREPAYMENT:
(a) Prime Rate. Borrower may prepay principal on any portion of this Note
----------
which bears interest determined in relation to the Prime Rate at any time, in
any amount and without penalty.
(b) LIBOR. Borrower may prepay principal on any portion of this Note
-----
which bears interest determined in relation to LIBOR at any time and in the
minimum amount of $100,000.00; provided however, that if the outstanding
principal balance of such portion of this Note is less than said amount, the
minimum prepayment amount shall be the entire outstanding principal balance
thereof. In consideration of Bank providing this prepayment option to Borrower,
or if any such portion of this Note shall become due and payable at any time
prior to the last day of the Fixed Rate Term applicable thereto by acceleration
or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is
the sum of the discounted monthly differences for each month from the month of
prepayment through the month in which such Fixed Rate Term matures, calculated
as follows for each such month:
(i) Determine the amount of interest which would have accrued each month
---------
on the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii) Subtract from the amount determined in (i) above the amount of
--------
interest which would have accrued for the same month on the amount prepaid for
the remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal
to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.
Each Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum 2.000% above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed). Each change in the rate of interest on any such past due
prepayment fee shall become effective on the date each Prime Rate change is
announced within Bank.
EVENTS OF DEFAULT:
The occurrence of any of the following shall constitute an "Event of
Default" under this Note:
(a) The failure to pay any principal, interest, fees or other charges when
due hereunder or under any contract, instrument or document executed in
connection with this Note.
(b) The filing of a petition by or against any Borrower, any guarantor of
this Note or any general partner or joint venturer in any Borrower which is a
partnership or a joint venture (with each such guarantor, general partner
and/or joint venturer referred to herein as a "Third Party Obligor") under any
provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as
amended or recodified from time to time, or under any similar or other law
relating to bankruptcy, insolvency, reorganization or other relief for debtors;
the appointment of a receiver, trustee, custodian or liquidator of or for any
part of the assets or property of any Borrower or Third Party Obligor; any
Borrower or Third Party Obligor becomes insolvent, makes a general assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any attachment or like levy on any property of any Borrower or Third
Party Obligor.
(c) The death or incapacity of any individual Borrower or Third Party
Obligor, or the dissolution or liquidation of any Borrower or Third Party
Obligor which is a corporation, partnership, joint venture or other type of
entity.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under any provisions of any contract, instrument or
document pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase obligation, or any other liability
of any kind to any person or entity, including the holder.
<PAGE>
(e) Any financial statement provided by any Borrower or Third Party
Obligor to Bank proves to be incorrect, false or misleading in any material
respect.
(f) Any sale or transfer of all or a substantial or material part of the
assets of any Borrower or Third Party Obligor other than in the ordinary course
of its business.
(g) Any violation or breach of any provision of, or any defined event of
default under, any addendum to this Note or any loan agreement, guaranty,
security agreement, deed of trust, mortgage or other document executed in
connection with or securing this Note.
MISCELLANEOUS:
(a) Remedies. Upon the occurrence of any Event of Default, the holder
--------
of this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, notice of nonperformance, notice of protest, protest or
notice of dishonor, all of which are expressly waived by each Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Each Borrower shall pay to the holder
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in connection with the enforcement of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note, and the prosecution or defense of any action in any way related to
this Note, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.
(b) Obligations and Joint and Several. Should more than one person or
---------------------------------
entity sign this Note as a Borrower, the obligations of each such Borrower shall
be joint and several.
(c) Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the state of California.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.
STAAR SURGICAL COMPANY
By: /s/ William C. Huddleston
--------------------------
WILLIAM C. HUDDLESTON
CHIEF FINANCIAL OFFICER
REVOLVING LINE OF CREDIT NOTE (08/96), PAGE 4
<PAGE>
EXHIBIT 10.29
MODIFICATION TO EMPLOYMENT AGREEMENT
This Modification to Employment Agreement ("Modification") is dated
for identification purposes only as of the 6th day of May 1996 by and between
STAAR Surgical Company, a Delaware corporation, located at 1911 Walker Avenue,
Monrovia, California 91016 (the "Company") and Vladimir Feingold, whose address
is 31732 Isle Vista, Laguna Niguel, California 92677 (the "Executive") based on
the following:
RECITALS
A. On January 1, 1994 the Executive agreed to render services to the
Company through December 31, 1996 on the terms and subject to the conditions set
forth in that certain "Employment Agreement" signed by the Executive and by the
Company.
B. Pursuant to paragraph 13(c)(i) of the Employment Agreement, the
Company and the Executive wish to modify its terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Modification, the Company and the Executive agree as
follows:
AGREEMENT
1. MODIFICATION OF EMPLOYMENT TERM. Paragraph 2 of the Employment
-------------------------------
Agreement shall be modified to state:
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with the Company pursuant
to the terms of this Agreement for the period beginning on January 1, 1994
and ending on December 31, 2001. Beginning on January 1, 2001, but not
later than June 30, 2001, either party may give notice to the other that
the party desires to renew this Agreement. Thereafter, the terms and
conditions of this Agreement shall apply until the parties reach an
agreement modifying them. If an agreement is not reduced to writing and
executed by the parties by December 31, 2001, then this Agreement shall
continue on a month to month basis until terminated by written notice given
by either party at least thirty (30) days prior to the end of any monthly
period.
2. GRANT OF ADDITIONAL STOCK OPTIONS. There shall be added to
---------------------------------
Paragraph 7 of the Employment Agreement a subparagraph (f) which shall state the
following:
<PAGE>
Non-Qualified Stock Options. Executive shall be included in the 1996 STAAR
---------------------------
Surgical Company Non-Qualified Stock Plan (the "Plan") adopted by Company.
Pursuant to the terms of the Plan, Executive shall be entitled to purchase
seventy thousand (70,000) shares of Company's common stock (which options
shall vest over a period of five (5) years, fourteen thousand (14,000)
shares each on May 6, 1998, May 6, 1999, May 6, 2000, May 6, 2001 and May
6, 2002, respectively), all of which option rights shall expire on May 6,
2006. The purchase price per share shall be $12.50. Stock issued pursuant
to the Plan shall be restricted stock, although Company shall reserve the
right to issue registered shares if it so decides. Executive agrees to be
bound by the terms of the Plan as adopted. These options shall be non-
qualified stock options.
3. DELETION OF PROVISION RELATING TO LOAN FORGIVENESS. Paragraph
--------------------------------------------------
7(e)(iii) of the Employment Agreement which is entitled "Forgiveness of the
Loans" shall be deleted in its entirety.
4. ADDITION OF PROVISION FOR CHANGE OF CONTROL. There shall be
-------------------------------------------
added to paragraph 7 the following subparagraph (g):
Severance Pay Upon Change of Control. Upon the sale or disposition by
------------------------------------
Company of substantially all of its business or assets or the sale of the
capital stock of Company in connection with the sale or transfer of a
controlling interest in Company to a third party or the merger or
consolidation of Company with another corporation as part of a sale or
transfer of a controlling interest in Company to a third party, Executive
shall receive, as additional compensation and not in lieu of his rights
under this Agreement, two (2) years' salary. "A controlling interest"
shall be defined as 50% or more of the common stock of the Company. "Two
(2) years' salary" shall be defined as only the cash compensation paid to
Executive pursuant to subparagraph (a) above, as it may be modified from
time to time, and shall not include employee benefits, incentive stock
options, automobile allowance or debt forgiveness, if any. Executive shall
be entitled to receive this additional compensation if Executive's
employment is terminated as a result of the change of control described
herein or, if Executive, at Executive's election, terminates his employment
as a result of such change of control.
<PAGE>
5. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME. The Company
-------------------------------------------------
and the Executive agree that all other terms and conditions of the Employment
Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Modification on the
6th day of May, 1996.
"COMPANY"
STAAR Surgical Company
By: /s/ John R. Wolf
-------------------------------------
"EXECUTIVE"
/s/ Vladimir Feingold
----------------------------------------
Vladimir Feingold
<PAGE>
EXHIBIT 10.31
MODIFICATION TO EMPLOYMENT AGREEMENT
This Modification to Employment Agreement ("Modification") is dated
for identification purposes only as of the 6th day of May 1996 and is made by
and between STAAR Surgical Company, a Delaware corporation, located at 1911
Walker Avenue, Monrovia, California 91016 (the "Company") and William C.
Huddleston, whose address is 363 Timken Road, Anaheim, California 92808 (the
"Executive") based on the following:
RECITALS
A. On January 1, 1994 the Executive agreed to render services to the
Company through December 31, 1996 on the terms and subject to the conditions set
forth in that certain "Employment Agreement" signed by the Executive and by the
Company.
B. Pursuant to paragraph 12(c)(i) of the Employment Agreement, the
Company and the Executive wish to modify its terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Modification, the Company and the Executive agree as
follows:
AGREEMENT
1. MODIFICATION OF EMPLOYMENT TERM. Paragraph 2 of the Employment
-------------------------------
Agreement shall be modified to state:
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with the Company pursuant
to the terms of this Agreement for the period beginning on January 1, 1994
and ending on December 31, 2001.
2. GRANT OF ADDITIONAL STOCK OPTIONS. There shall be added to
---------------------------------
Paragraph 6(c) of the Employment Agreement a second paragraph which shall state
the following:
Executive shall be included in the 1996 STAAR Surgical Company Non-
Qualified Stock Plan (the "Plan") adopted by Company. Pursuant to the
terms of the Plan, Executive shall be entitled to purchase fifty thousand
(50,000) shares of Company's common stock, which options shall vest over a
period of five (5) years (ten thousand (10,000) shares each on May 6, 1998,
May 6, 1999, May 6, 2000, May 6, 2001 and May 6, 2002, respectively), and
all of which option rights shall expire on May 6, 2006. The purchase price
per share shall be $12.50. Stock issued pursuant to the Plan shall be
restricted stock, although Company shall reserve the right to issue
registered shares if it so decides. Executive agrees to be bound by the
terms of the Plan as adopted. These options shall
<PAGE>
be non-qualified stock options.
3. SEVERANCE PAY UPON CHANGE OF CONTROL. Paragraph 6(d) of the
------------------------------------
Employment Agreement shall be modified to state:
Upon the sale or disposition by Company of substantially all of its
business or assets or the sale of the capital stock of Company in
connection with the sale or transfer of a controlling interest in Company
to a third party or the merger or consolidation of Company with another
corporation as part of a sale or transfer of a controlling interest in
Company to a third party, Executive shall receive, as additional
compensation and not in lieu of his rights under this Agreement, two (2)
years' salary. "A controlling interest" shall be defined as 50% or more of
the common stock of the Company. "Two (2) years' salary" shall be defined
as only the cash compensation paid to Executive pursuant to subparagraph
(a) above, as it may be modified from time to time, and shall not include
employee benefits, incentive stock options, automobile allowance or debt
forgiveness, if any. Executive shall be entitled to receive this
additional compensation if Executive's employment is terminated as a result
of the change of control described herein or, if Executive, at Executive's
election, terminates his employment as a result of such change of control.
4. MODIFICATION TO TERMINATION PROVISION. The first sentence of
-------------------------------------
paragraph 10(b) shall be modified to state: "Executive may, in his sole but
reasonable judgment, terminate this Agreement if Executive determines that
Company has . . . ."
5. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME. The Company
-------------------------------------------------
and the Executive agree that all other terms and conditions of the Employment
Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Modification as of
the date first written above.
"COMPANY"
STAAR Surgical Company
By: /s/ John R. Wolf
-------------------------------------
"EXECUTIVE"
/s/ William C. Huddleston
----------------------------------------
William C. Huddleston
<PAGE>
EXHIBIT 10.33
MODIFICATION TO EMPLOYMENT AGREEMENT
This Modification to Employment Agreement ("Modification") is dated
for identification purposes only as of the 6th day of May 1996 and is made by
and between STAAR Surgical Company, a Delaware corporation, located at 1911
Walker Avenue, Monrovia, California 91016 (the "Company") and Carl M. Manisco,
whose address is 12611 Hillside Drive, Moorpark, California 93021 (the
"Executive") based on the following:
RECITALS
A. On January 1, 1994 the Executive agreed to render services to the
Company through December 31, 1996 on the terms and subject to the conditions set
forth in that certain "Employment Agreement" signed by the Executive and by the
Company.
B. Pursuant to paragraph 12(c)(i) of the Employment Agreement, the
Company and the Executive wish to modify its terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Modification, the Company and the Executive agree as
follows:
AGREEMENT
1. MODIFICATION OF EMPLOYMENT TERM. Paragraph 2 of the Employment
-------------------------------
Agreement shall be modified to state:
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with the Company pursuant
to the terms of this Agreement for the period beginning on January 1, 1994
and ending on December 31, 2001.
2. MODIFICATION OF ADDITIONAL COMPENSATION. Paragraph 6(b) shall be
---------------------------------------
deleted in its entirety and the following shall appear in its place:
As additional compensation through December 31, 1996, Executive shall
receive one-fourth of one percent of all net domestic sales of Company's
products, which shall be defined as gross domestic sales less returns,
shipping, handling, sales taxes, chargebacks and allowances. After
December 31, 1996, Company shall have the right to review the additional
compensation prior to each subsequent year of the term of the Employment
Agreement and, at the election of Company, Company shall determine if it
will continue to pay the additional compensation or if it will modify the
computation of the additional compensation.
<PAGE>
3. GRANT OF ADDITIONAL STOCK OPTIONS. There shall be added to
---------------------------------
Paragraph 6(d) of the Employment Agreement a second paragraph which shall state
the following:
Executive shall be included in the 1996 STAAR Surgical Company Non-
Qualified Stock Plan (the "Plan") adopted by Company. Pursuant to the
terms of the Plan, Executive shall be entitled to purchase fifty thousand
(50,000) shares of Company's common stock, which options shall vest over a
period of five (5) years (ten thousand (10,000) shares each on May 6, 1998,
May 6, 1999, May 6, 2000, May 6, 2001 and May 6, 2002, respectively), and
all of which option rights shall expire on May 6, 2006. The purchase price
per share shall be $12.50. Stock issued pursuant to the Plan shall be
restricted stock, although Company shall reserve the right to issue
registered shares if it so decides. Executive agrees to be bound by the
terms of the Plan as adopted. These options shall be non-qualified stock
options.
4. SEVERANCE PAY UPON CHANGE OF CONTROL. Paragraph 6(e) of the
------------------------------------
Employment Agreement shall be modified to state:
Upon the sale or disposition by Company of substantially all of its
business or assets or the sale of the capital stock of Company in
connection with the sale or transfer of a controlling interest in Company
to a third party or the merger or consolidation of Company with another
corporation as part of a sale or transfer of a controlling interest in
Company to a third party, Executive shall receive, as additional
compensation and not in lieu of his rights under this Agreement, two (2)
years' salary. "A controlling interest" shall be defined as 50% or more of
the common stock of the Company. "Two (2) years' salary" shall be defined
as only the cash compensation paid to Executive pursuant to subparagraph
(a) above, as it may be modified from time to time, and shall not include
employee benefits, incentive stock options, automobile allowance or debt
forgiveness, if any. Executive shall be entitled to receive this
additional compensation if Executive's employment is terminated as a result
of the change of control described herein or, if Executive, at Executive's
election, terminates his employment as a result of such change of control.
5. MODIFICATION TO TERMINATION PROVISION. The first sentence of
-------------------------------------
paragraph 10(b) shall be modified to state: "Executive may, in his sole but
reasonable judgment, terminate this Agreement if Executive determines that
Company has . . . ."
<PAGE>
6. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME. The Company
-------------------------------------------------
and the Executive agree that all other terms and conditions of the Employment
Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Modification on
this 6th day of May, 1996.
"COMPANY"
STAAR Surgical Company
By: /s/ John R. Wolf
-------------------------------------
"EXECUTIVE"
/s/ Carl M. Manisco
----------------------------------------
Carl M. Manisco
<PAGE>
EXHIBIT 10.35
MODIFICATION TO EMPLOYMENT AGREEMENT
This Modification to Employment Agreement ("Modification") is dated
for identification purposes only as of the 6th day of May 1996 by and between
STAAR Surgical Company, a Delaware corporation, located at 1911 Walker Avenue,
Monrovia, California 91016 (the "Company") and Michael J. Lloyd, whose address
is 2409 Bonnie Brae Avenue, Claremont, California 91711 (the "Executive") based
on the following:
RECITALS
A. On January 1, 1994 the Executive agreed to render services to the
Company through December 31, 1996 on the terms and subject to the conditions set
forth in that certain "Employment Agreement" signed by the Executive and by the
Company.
B. Pursuant to paragraph 12(c)(i) of the Employment Agreement, the
Company and the Executive wish to modify its terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Modification, the Company and the Executive agree as
follows:
AGREEMENT
1. MODIFICATION OF EMPLOYMENT TERM. Paragraph 2 of the Employment
-------------------------------
Agreement shall be modified to state:
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with the Company pursuant
to the terms of this Agreement for the period beginning on January 1, 1994
and ending on December 31, 2001.
2. GRANT OF ADDITIONAL STOCK OPTIONS. There shall be added to
---------------------------------
Paragraph 6(c) of the Employment Agreement a second paragraph which shall state
the following:
Executive shall be included in the 1996 STAAR Surgical Company Non-
Qualified Stock Plan (the "Plan") adopted by Company. Pursuant to the
terms of the Plan, Executive shall be entitled to purchase fifty thousand
(50,000) shares of Company's common stock, which options shall vest over a
period of five (5) years (ten thousand (10,000) shares each on May 6, 1998,
May 6, 1999, May 6, 2000, May 6, 2001 and May 6, 2002, respectively), and
all of which option rights shall expire on May 6, 2006. The purchase price
per share shall be $12.50. Stock issued pursuant to the Plan shall be
restricted stock, although Company shall reserve the right to issue
registered shares if it so decides. Executive agrees to be bound
<PAGE>
by the terms of the Plan as adopted. These options shall be non-qualified
stock options.
3. SEVERANCE PAY UPON CHANGE OF CONTROL. Paragraph 6(d) of the
------------------------------------
Employment Agreement shall be modified to state:
Upon the sale or disposition by Company of substantially all of its
business or assets or the sale of the capital stock of Company in
connection with the sale or transfer of a controlling interest in Company
to a third party or the merger or consolidation of Company with another
corporation as part of a sale or transfer of a controlling interest in
Company to a third party, Executive shall receive, as additional
compensation and not in lieu of his rights under this Agreement, two (2)
years' salary. "A controlling interest" shall be defined as 50% or more of
the common stock of the Company. "Two (2) years' salary" shall be defined
as only the cash compensation paid to Executive pursuant to subparagraph
(a) above, as it may be modified from time to time, and shall not include
employee benefits, incentive stock options, automobile allowance or debt
forgiveness, if any. Executive shall be entitled to receive this
additional compensation if Executive's employment is terminated as a result
of the change of control described herein or, if Executive, at Executive's
election, terminates his employment as a result of such change of control.
4. MODIFICATION TO TERMINATION PROVISION. The first sentence of
-------------------------------------
paragraph 10(b) shall be modified to state: "Executive may, in his sole but
reasonable judgment, terminate this Agreement if Executive determines that
Company has . . . ."
5. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME. The Company
-------------------------------------------------
and the Executive agree that all other terms and conditions of the Employment
Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Modification on the
6th day of May, 1996.
"COMPANY"
STAAR Surgical Company
By: /s/ John R. Wolf
-------------------------------------
"EXECUTIVE"
/s/ Michael J. Lloyd
----------------------------------------
Michael J. Lloyd
<PAGE>
EXHIBIT 10.37
MODIFICATION TO EMPLOYMENT AGREEMENT
This Modification to Employment Agreement ("Modification") is dated
for identification purposes only as of the 6th day of May 1996 and is made by
and between STAAR Surgical Company, a Delaware corporation, located at 1911
Walker Avenue, Monrovia, California 91016 (the "Company") and Steven L. Ziemba,
whose address is 20845 High Country Drive, Diamond Bar, California 91789 (the
"Executive") based on the following:
RECITALS
A. On January 1, 1994 the Executive agreed to render services to the
Company through December 31, 1996 on the terms and subject to the conditions set
forth in that certain "Employment Agreement" signed by the Executive and by the
Company.
B. Pursuant to paragraph 12(c)(i) of the Employment Agreement, the
Company and the Executive wish to modify its terms and conditions.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Modification, the Company and the Executive agree as
follows:
AGREEMENT
1. MODIFICATION OF EMPLOYMENT TERM. Paragraph 2 of the Employment
-------------------------------
Agreement shall be modified to state:
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with the Company pursuant
to the terms of this Agreement for the period beginning on January 1, 1994
and ending on January 1, 2000.
2. GRANT OF ADDITIONAL STOCK OPTIONS. There shall be added to
---------------------------------
Paragraph 6(c) of the Employment Agreement a second paragraph which shall state
the following:
Executive shall be included in the 1996 STAAR Surgical Company Non-
Qualified Stock Plan (the "Plan") adopted by Company. Pursuant to the
terms of the Plan, Executive shall be entitled to purchase fifty thousand
(50,000) shares of Company's common stock, which options shall vest over a
period of five (5) years (ten thousand (10,000) shares each on May 6, 1998,
May 6, 1999, May 6, 2000, May 6, 2001 and May 6, 2002, respectively), and
all of which option rights shall expire on May 6, 2006. The purchase price
per share shall be $12.50. Stock issued pursuant to the Plan shall be
restricted stock, although Company shall reserve the right to issue
registered shares if it so decides. Executive agrees to be bound
<PAGE>
by the terms of the Plan as adopted. These options shall be non-qualified
stock options.
3. SEVERANCE PAY UPON CHANGE OF CONTROL. Paragraph 6(d) of the
------------------------------------
Employment Agreement shall be modified to state:
Upon the sale or disposition by Company of substantially all of its
business or assets or the sale of the capital stock of Company in
connection with the sale or transfer of a controlling interest in Company
to a third party or the merger or consolidation of Company with another
corporation as part of a sale or transfer of a controlling interest in
Company to a third party, Executive shall receive, as additional
compensation and not in lieu of his rights under this Agreement, two (2)
years' salary. "A controlling interest" shall be defined as 50% or more of
the common stock of the Company. "Two (2) years' salary" shall be defined
as only the cash compensation paid to Executive pursuant to subparagraph
(a) above, as it may be modified from time to time, and shall not include
employee benefits, incentive stock options, automobile allowance or debt
forgiveness, if any. Executive shall be entitled to receive this
additional compensation if Executive's employment is terminated as a result
of the change of control described herein or, if Executive, at Executive's
election, terminates his employment as a result of such change of control.
4. MODIFICATION TO TERMINATION PROVISION. The first sentence of
-------------------------------------
paragraph 10(b) shall be modified to state: "Executive may, in his sole but
reasonable judgment, terminate this Agreement if Executive determines that
Company has . . . ."
5. ALL OTHER TERMS AND CONDITIONS TO REMAIN THE SAME. The Company
-------------------------------------------------
and the Executive agree that all other terms and conditions of the Employment
Agreement shall remain the same.
IN WITNESS WHEREOF, the parties have executed this Modification on the
6th day of May, 1996.
"COMPANY"
STAAR Surgical Company
By: /s/ John R. Wolf
-------------------------------------
"EXECUTIVE"
/s/ Steven L. Ziemba
----------------------------------------
Steven L. Ziemba
<PAGE>
EXHIBIT 10.38
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("Agreement"), which is dated for
identification purposes only as of May 6, 1996, is made by and between STAAR
SURGICAL COMPANY, a Delaware corporation, located at 1911 Walker Avenue,
Monrovia, California, 91016 and hereinafter referred to as "Company", and DONALD
D. FERGUSON, whose address is 416 Gordon Terrace, Pasadena, California 91105,
hereinafter referred to as "Executive", based upon the following:
RECITALS
--------
WHEREAS, Company wishes to retain the services of Executive as its
Vice President of International Sales and to set forth in this Agreement the
duties and responsibilities that Executive has agreed to undertake on behalf of
Company; and
WHEREAS, Executive wishes to render services to Company as its Vice
President of International Sales and to have set forth in this Agreement the
duties and responsibilities he has agreed to undertake on behalf of Company.
THEREFORE, in consideration of the foregoing and of the mutual
promises contained in this Agreement, Company and Executive (who are sometimes
individually referred to as a "party" and collectively referred to as the
"parties") agree as follows:
AGREEMENT
---------
1. "COMPANY" DEFINED.
-----------------
The term "Company" as used in this Agreement shall mean STAAR Surgical
Company, any surviving corporation into which it may be merged or any
corporation resulting from its consolidation with any other corporation or
corporations.
2. SPECIFIED PERIOD.
----------------
Company hereby employs Executive pursuant to the terms of this
Agreement and Executive hereby accepts employment with Company pursuant to the
terms of this Agreement for the period beginning on January 1, 1996 and ending
on December 31, 1998.
3. GENERAL DUTIES.
--------------
Executive shall report only to Company's Chief Executive Officer.
Executive shall devote his entire productive time, ability, and attention to
Company's business during the term of this Agreement. Unless otherwise modified
by the Board of Directors (the "Board"), Executive shall serve as the Company's
Vice President of International Sales. In this capacity, Executive shall do and
perform all services, acts, or things necessary or
1
<PAGE>
advisable to discharge his duties under this Agreement, including, but not
limited to, overseeing international marketing and sales, recruiting and hiring
direct sales persons and/or distributors internationally and supervising their
performance, establishing and meeting Company international sales goals,
preparing sales forecasts and reporting to the Company on international sales.
Executive shall perform such other duties as are commonly performed by a Vice
President of a publicly traded corporation or which may from time to time be
prescribed by the Board. Furthermore, Executive agrees to cooperate with and
work to the best of his ability with Company's management team, which includes
the Board and the officers, to continually improve Company's reputation in its
industry for quality products and performance.
4. NONCOMPETITION, NONSOLICITATION AND NONINTERFERENCE
---------------------------------------------------
AND PROPRIETARY PROPERTY AND CONFIDENTIAL
-----------------------------------------
INFORMATION PROVISIONS.
----------------------
(A) NONCOMPETITION.
--------------
(1) "Applicable Definitions" For purposes of this paragraph
---------- -----------
4, the following capitalized terms shall have the definitions set forth below:
i. "Business Segments" - The term "Business Segments" is
-------- --------
defined as each of Company's (or Company's affiliates') products or product
lines.
ii. "Competitive Business" - The term "Competitive Business" is
----------- --------
defined as any business that is or may be competitive with or similar to or
adverse to any of Company's (or Company's affiliates') Business Segments,
whether such business is conducted by a proprietorship, partnership,
corporation or other entity or venture.
iii. "Territory" - The term "Territory" is defined as the
---------
geographic area (both within the United States and internationally) in
which each Business Segment is carried on including, by way of example and
not limitation, the entire geographic area in which Company conducts
various phases of such Business Segment, including purchasing, production,
distribution, promotional and marketing activities, sales, and location of
plants and warehouses.
(2) Covenant Not To Compete. Executive hereby covenants and
-----------------------
agrees that during the term of this Agreement, and for a period of one (1) year
from the date this Agreement is terminated or expires, Executive shall not, with
respect to each Business Segment and within the boundaries of the Territory
applicable to such Business Segment, without the prior written consent of
Company (which consent may be withheld in the sole and absolute discretion of
Company), directly or indirectly, either
2
<PAGE>
alone or in association or in connection with or on behalf of any person, firm,
partnership, corporation or other entity or venture now existing or hereafter
created: (i) be or become interested or engaged in, directly or indirectly, with
any Competitive Business including, without limitation, being or becoming an
organizer, investor, lender, partner, joint venturer, stockholder, officer,
director, employee, manager, independent sales representative, associate,
consultant, agent, supplier, vendor, vendee, lessor, or lessee to any
Competitive Business, or (ii) in any manner associate with, or aid or abet or
give information or financial assistance to any Competitive Business, or (iii)
use or permit the use of Executive's name or any part thereof to be used or
employed in connection with any Competitive Business (collectively and
severally, the "Noncompetition Covenants"). Notwithstanding the foregoing, the
------------------------
provisions of this paragraph 4(a)2. shall not be deemed to prevent the purchase
or ownership by Executive as a passive investment of the outstanding capital
shares of any publicly held corporation, so long as any other obligation or duty
under the Noncompetition Covenants are not breached.
(3) Separate Covenants. The Noncompetition Covenants shall be
------------------
construed to be divided into separate and distinct Noncompetition Covenants with
respect to (i) each Business Segment and (ii) each matter or type of conduct
described therein. Each of such divided Noncompetition Covenants shall be
separate and distinct from all such other Noncompetition Covenants with respect
to the same or any other Business Segment.
(4) Acknowledgements. Executive acknowledges that: (i) the covenants
----------------
and the restrictions contained in the Noncompetition Covenants are necessary,
fundamental, and required for the protection of Company's business; (ii) the
Noncompetition Covenants relate to matters which are of a special, unique and
extraordinary value; and (iii) a breach of any of the Noncompetition Covenants
will result in irreparable harm and damages which cannot be adequately
compensated by a monetary award.
(5) Judicial Limitation. Notwithstanding the foregoing, if at any
-------------------
time a court of competent jurisdiction holds that any portion of any
Noncompetition Covenant is unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, such Noncompetition Covenant shall be
interpreted to extend only over the maximum period of time, maximum geographical
area, or maximum extent in all other respects, as the case may be, as to which
it may be enforceable, all as determined by such court in such action.
3
<PAGE>
(B) NONSOLICITATION AND NONINTERFERENCE.
-----------------------------------
(1) Covenants. Executive hereby covenants and agrees that
---------
during the term of this Agreement, and for a period of one (1) year from the
date this Agreement terminates or expires, Executive shall not, either for
Executive's own account or directly or indirectly in conjunction with or on
behalf of any person, partnership, corporation or other entity or venture:
i. Solicit or employ or attempt to solicit or employ any person
who is then or has, within twelve (12) months prior thereto, been an
officer, partner, manager, agent or employee of Company or any affiliate of
Company whether or not such a person would commit a breach of that person's
contract of employment with Company or any affiliate of Company, if any, by
reason of leaving the service of Company or any affiliate of Company (the
"Nonsolicitation Covenant"); or
---------------- --------
ii. On behalf of, directly or indirectly, any Competitive
Business (as such term is defined in paragraph 4 (a)1.ii.), or for the
purpose of or with the reasonably foreseeable effect of harming the
business of Company, solicit the business of any person, firm or company
which is then, or has been at any time during the preceding twelve (12)
months prior to such solicitation, a customer, client, contractor, supplier
or vendor of Company or any affiliate of Company (the "Noninterference
---------------
Covenant)".
--------
(2) Acknowledgements. Each of the parties acknowledges that:
----------------
(i) the covenants and the restrictions contained in the Nonsolicitation and
Noninterference Covenants are necessary, fundamental, and required for the
protection of the business of Company; (ii) such Covenants relate to matters
which are of a special, unique and extraordinary value; and (iii) a breach of
either of such Covenants will result in irreparable harm and damages which
cannot be adequately compensated by a monetary award.
(3) Judicial Limitation. Notwithstanding the foregoing, if at
-------------------
any time, despite the express agreement of Company and Executive, a court of
competent jurisdiction holds that any portion of any Nonsolicitation or
Noninterference Covenant is unenforceable by reason of its extending for too
great a period of time or by reason of its being too extensive in any other
respect, such Covenant shall be interpreted to extend only over the maximum
period of time or to the maximum extent in all other respects, as the case may
be, as to which it may be enforceable, all as determined by such court in such
action.
4
<PAGE>
(C) PROPRIETARY PROPERTY; CONFIDENTIAL INFORMATION.
----------------------------------------------
(1) "Applicable Definitions" For purposes of this paragraph
---------- -----------
4(c), the following capitalized terms shall have the definitions set forth
below:
i. "Confidential Information" - The term "Confidential
------------ -----------
Information" is collectively and severally defined as any information,
matter or thing of a secret, confidential or private nature, whether or not
so labelled, which is connected with Company's business or methods of
operation or concerning any of Company's suppliers, customers, licensors,
licensees or others with whom Company has a business relationship, and
which has current or potential value to Company or the unauthorized
disclosure of which could be detrimental to Company. Confidential
Information shall be broadly defined and shall include, by way of example
and not limitation,: (i) matters of a business nature available only to
management and owners of Company of which Executive may become aware (such
as information concerning customers, vendors and suppliers, including their
names, addresses, credit or financial status, buying or selling habits,
practices, requirements, and any arrangements or contracts that Company may
have with such parties, Company's marketing methods, plans and strategies,
the costs of materials, the prices Company obtains or has obtained or at
which Company sells or has sold its products or services, Company's
manufacturing and sales costs, the amount of compensation paid to employees
of Company and other terms of their employment, financial information such
as financial statements, budgets and projections, and the terms of any
contracts or agreements Company has entered into) and (ii) matters of a
technical nature (such as product information, trade secrets, know-how,
formulae, innovations, inventions, devices, discoveries, techniques,
formats, processes, methods, specifications, designs, patterns, schematics,
data, compilation of information, test results, and research and
development projects). For purposes of the foregoing, the term "trade
secrets" shall mean the broadest and most inclusive interpretation of trade
secrets as defined by Section 3426.1(d) of the California Civil Code (the
---------------------
Uniform Trade Secrets Act) and cases interpreting the scope of said
Section.
ii. "Proprietary Property" - The term "Proprietary Property" is
----------- --------
collectively and severally defined as any written or tangible property
owned or used by Company in connection with Company's business, whether or
not such property also qualifies as Confidential Information. Proprietary
Property shall be broadly defined and shall include, by way of example and
not limitation, products, samples, equipment, files, lists, books,
notebooks, records, documents, memoranda, reports, patterns, schematics,
compilations, designs,
5
<PAGE>
drawings, data, test results, contracts, agreements, literature,
correspondence, spread sheets, computer programs and software, computer
print outs, other written and graphic records, and the like, whether
originals, copies, duplicates or summaries thereof, affecting or relating
to the business of Company, financial statements, budgets, projections,
invoices.
(2) Ownership of Proprietary Property. Executive acknowledges
---------------------------------
that all Proprietary Property which Executive may prepare, use, observe, come
into possession of and/or control shall, at all times, remain the sole and
exclusive property of Company. Executive shall, upon demand by Company at any
time, or upon the cessation of Executive's employment, irrespective of the time,
manner, cause or lack of cause of such cessation, immediately deliver to Company
or its designated agent, in good condition, ordinary wear and tear and damage by
any cause beyond the reasonable control of Executive excepted, all items of the
Proprietary Property which are or have been in Executive's possession or under
his control, as well as a statement describing the disposition of all items of
the Proprietary Property beyond Executive's possession or control in the event
Executive has not previously returned such items of the Proprietary Property to
Company.
(3) Agreement Not to Use or Divulge Confidential Information.
--------------------------------------------------------
Executive agrees that he will not, in any fashion, form or manner, unless
specifically consented to in writing by Company, either directly or indirectly
use, divulge, transmit or otherwise disclose or cause to be used, divulged,
transmitted or otherwise disclosed to any person, firm or corporation, in any
manner whatsoever (other than in Executive's performance of duties for Company
or except as required by law) any Confidential Information of any kind, nature
or description. The foregoing provisions shall not be construed to prevent
Executive from making use of or disclosing information which is in the public
domain through no fault of Executive, provided, however, specific information
shall not be deemed to be in the public domain merely because it is encompassed
by some general information that is published or in the public domain or in
Executive's possession prior to Executive's employment with Company.
(4) Acknowledgement of Secrecy. Executive acknowledges that the
--------------------------
Confidential Information is not generally known to the public or to other
persons who can obtain economic value from its disclosure or use and that the
Confidential Information derives independent economic value thereby, and
Executive agrees that he shall take all efforts reasonably necessary to maintain
the secrecy and confidentiality of the Confidential Information and to otherwise
comply with the terms of this Agreement.
6
<PAGE>
(5) Inventions, Discoveries. Executive acknowledges that any
-----------------------
inventions, discoveries or trade secrets, whether patentable or not, made or
found by Executive in the scope of his employment with Company constitute
property of Company and that any rights therein now held or hereafter acquired
by Executive individually or in any capacity are hereby transferred and assigned
to Company, and agrees to execute and deliver any confirmatory assignments,
documents or instruments of any nature necessary to carry out the intent of this
paragraph when requested by Company without further compensation therefor,
whether or not Executive is at the time employed by Company. Provided, however,
notwithstanding the foregoing, Executive shall not be required to assign his
rights in any invention which qualifies fully under the provisions of Section
2870(a) of the California Labor Code, which provides, in pertinent part, that
---------------------
the requirement to assign "shall not apply to any invention that the employee
developed entirely on his or her own time without using employer's equipment,
supplies, facilities or trade secret information except for those inventions
that either:
(i) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
(ii) Result from any work performed by the employee for the
employer."
Executive understands that he bears the full burden of proving to
Company that an invention qualifies fully under Section 2870(a). By signing this
Agreement, Executive acknowledges receipt of a copy of this Agreement and of
written notification of the provisions of Section 2870.
5. COMPLIANCE WITH SECURITIES LAWS. Executive acknowledges that Company
-------------------------------
and Executive will be subject to the provisions of Sections 10(b), 16(a) and
16(b) of the Securities Exchange Act of 1934. Executive acknowledges that
Section 16(a) of the Securities Exchange Act requires Executive to report the
ownership or transfer of his stock or other securities in Company to the
Securities and Exchange Commission and that Sections 10(b) and 16(b) can
prohibit Executive from selling or transferring his stock or securities in
Company. Executive agrees that he will comply with Company's policies, as stated
from time to time, relating to selling or transferring his stock or securities
in Company.
7
<PAGE>
6. COMPENSATION.
------------
(A) SALARY. During the term of this Agreement, Company shall pay to
------
Executive a base salary of One Hundred Twenty Thousand Dollars ($120,000) per
year. Executive's annual salary shall be reviewed periodically by Company for
the purpose of determining whether Executive's salary shall be increased. In no
event shall this review take place less frequently than annually. Executive
shall also be entitled to receive such bonuses or other compensation from time
to time as may be granted to him by Company's Board, in its discretion.
(B) ADDITIONAL COMPENSATION. As additional compensation to be paid
-----------------------
during the first year of the term of this Agreement, Executive shall receive
one-half of one percent of all net international sales of products manufactured
by Company up to $15 million, which percentage shall be reduced to one-quarter
of one percent of all net international sales in excess of $15 million. "Net
international sales" shall be defined as gross international sales less returns,
shipping, handling, sales taxes, chargebacks and allowances. International sales
shall not include sales made in North America, South America, the Caribbean,
Japan, sales made pursuant to the Agreement between Company and China Eye Joint
Venture, or sales made to any existing or future joint venture partner or other
entity with which Company establishes a business relationship and to which
Company sells its products without the services of direct sales persons or
distributors. After December 31, 1996, Company shall have the right to review
the additional compensation prior to each subsequent year of the term of this
Agreement and, at the election of Company, Company shall determine if it will
continue to pay the additional compensation or if it will modify the computation
of the additional compensation.
(C) EMPLOYEE BENEFIT PLANS. Executive shall be entitled, during the
----------------------
term of this Agreement, to participate in any retirement, pension, profit-
sharing, insurance, or other plans which may now be in effect or which may be
adopted by Company. During the term of this Agreement, Company, at its sole cost
and expense, shall provide to Executive: (i) disability insurance, the terms of
which shall be determined in the sole discretion of the Board; and (ii) life
insurance on the life of Executive in the face amount of Two Hundred Thousand
Dollars ($200,000).
(D) STOCK OPTIONS. Executive shall be included in the 1996 STAAR
-------------
Surgical Company Non-Qualified Stock Plan (the "Plan") as adopted by Company.
Pursuant to the terms of the Plan, Executive shall be entitled to purchase
thirty thousand (30,000) shares of Company's common stock, which options shall
vest over a period of five (5) years (six thousand (6,000) shares each on May 6,
1997, May 6, 1998, May 6, 1999, May 6, 2000 and May 6, 2001, respectively), and
all of which option rights shall expire on May
8
<PAGE>
6, 2006. The purchase price per share shall be $12.50. Stock issued pursuant to
the Plan shall be restricted stock, although Company shall reserve the right to
issue registered shares if it so decides. Executive agrees to be bound by the
terms of the Plan as adopted. These options shall be non-qualified stock
options.
(E) SEVERANCE PAY UPON CHANGE OF CONTROL. Upon the sale or
------------------------------------
disposition by Company of substantially all of its business or assets or the
sale of the capital stock of Company in connection with the sale or transfer of
a controlling interest in Company to a third party or the merger or
consolidation of Company with another corporation as part of a sale or transfer
of a controlling interest in Company to a third party, Executive shall receive,
as additional compensation and not in lieu of his rights under this Agreement,
one (1) year's salary. "A controlling interest" shall be defined as 50% or more
of the common stock of the Company. "One (1) year's salary" shall be defined as
only the cash compensation paid to Executive pursuant to subparagraph (a) above,
as it may be modified from time to time, and shall not include employee
benefits, incentive stock options, automobile allowance or debt forgiveness, if
any. Executive shall be entitled to receive this additional compensation if
Executive's employment is terminated as a result of the change of control
described herein or, if Executive, at Executive's election, terminates his
employment as a result of such change of control.
(F) LOANS MADE TO EXECUTIVE. If Company makes any loan to Executive,
-----------------------
including any loan that Company may, in its discretion, make to Executive by
Company for the purpose of exercising the stock options discussed in
subparagraph (d) above, Executive shall be required to keep any such loan
adequately secured throughout its term by transferring to Company collateral
having a value which is not less than 110% of the unpaid principal and accrued
and unpaid interest of the loan. If the value of the collateral is impaired or
decreases, Executive shall transfer to Company additional collateral so that the
collateral securing repayment of any loan will always equal or exceed 110% of
the unpaid principal and accrued and unpaid interest of the loan.
7. REIMBURSEMENT OF BUSINESS EXPENSES.
----------------------------------
(A) REIMBURSEMENT FOR ORDINARY EXPENSES. Company shall promptly
-----------------------------------
reimburse Executive for all reasonable business expenses incurred by Executive
in connection with the business of Company. However, each such expenditure shall
be reimbursable only if Executive furnishes to Company adequate records and
other documentary evidence required by federal and state statutes and
regulations issued by the appropriate taxing authorities for the substantiation
of each such expenditure as an income tax deduction.
(B) REIMBURSEMENT FOR EXTRAORDINARY EXPENSES. Any single business
----------------------------------------
expense with a cost in excess of Five Thousand
9
<PAGE>
Dollars ($5,000) shall be deemed to be an extraordinary business expense.
Executive shall not incur any extraordinary business expense unless the expense
has been approved by the Chief Executive Officer. If Executive fails to obtain
the approval of the Chief Executive Officer, Company may refuse to reimburse
Executive for that expense.
8. ANNUAL VACATION/SICK LEAVE.
--------------------------
Executive shall be entitled to at least four (4) weeks vacation time
each year without loss of compensation. Executive shall be entitled to sick
leave in accordance with Company's general policy for its employees.
9. INDEMNIFICATION OF LOSSES.
-------------------------
So long as Executive's actions were taken in good faith and in
furtherance of Company's business and within the scope of Executive's duties and
authority, Company shall indemnify and hold Executive harmless to the full
extent of the law from any and all claims, losses and expenses sustained by
Executive as a result of any action taken by him to discharge his duties under
this Agreement, and Company shall defend Executive, at Company's expense, in
connection with any and all claims by stockholders or third parties which are
based upon actions taken by Executive to discharge his duties under this
Agreement.
10. PERSONAL CONDUCT.
----------------
Executive agrees promptly and faithfully to comply with all present
and future policies, requirements, directions, requests and rules and
regulations of Company in connection with Company's business. Executive further
agrees to conform to all laws and regulations and not at any time to commit any
act or become involved in any situation or occurrence tending to bring Company
into public scandal, ridicule or which will reflect unfavorably on the
reputation of Company.
11. TERMINATION FOR CAUSE.
---------------------
(A) TERMINATION BY COMPANY. Company reserves the right to declare
----------------------
Executive in default of this Agreement if Executive willfully breaches or
habitually neglects the duties which he is required to perform under the terms
of this Agreement, or if Executive commits such acts of dishonesty, fraud, or
misrepresentation as would prevent the effective performance of his duties and
results in material harm to Company's business, taken as a whole. Company may
terminate this Agreement for cause by giving written notice of termination to
Executive. With the exception of the covenants included in paragraph 4 above,
upon such termination the obligations of Executive and Company under this
Agreement shall immediately cease. Such termination shall be
10
<PAGE>
without prejudice to any other remedy to which Company may be entitled either at
law, in equity, or under this Agreement. If Executive's employment is terminated
pursuant to this paragraph, Company shall pay to Executive, within two (2)
business days of such termination, any deferred or unpaid compensation to which
Executive is entitled at the time of such termination.
(B) TERMINATION BY EXECUTIVE. Executive may terminate this Agreement
------------------------
if, in his sole but reasonable judgment, Executive determines that Company has:
(i) breached or failed to fulfill any of the representations, warranties, or
covenants in any agreements entered into between Company and Executive;
(ii) demoted Executive; (iii) required Executive to participate in any felony or
other serious crime; (iv) committed any act which may adversely reflect upon the
name and reputation of Executive; (v) effectuated any of the following actions
(unless Executive voted, in any of his capacities as a director or shareholder
of Company, in favor of such action): (A) authorized the future sale or
disposition by Company of substantially all of the business or assets of
Company, (B) authorized the sale of the capital stock of Company in connection
with the sale or transfer of a controlling interest in Company to a third party
or parties and its/their affiliates who are not presently affiliated with the
present stockholders of Company, (C) authorized the merger or consolidation of
Company with another corporation as part of a sale or transfer of a controlling
interest in Company to a third party or parties and its/their affiliates who are
not presently affiliated with the present stockholders of Company, or (D)
authorized the dissolution or liquidation of Company.
12. TERMINATION WITHOUT CAUSE.
-------------------------
(A) DEATH. Executive's employment shall terminate upon the death of
-----
Executive. Upon such termination, the obligations of Executive and Company under
this Agreement shall immediately cease.
(B) DISABILITY. Company reserves the right to terminate Executive's
----------
employment upon ten (10) days written notice if, for a period of sixty (60)
days, Executive is prevented from discharging his duties under this Agreement
due to any physical or mental disability. With the exception of the covenants
included in paragraph 4 above, upon such termination the obligations of
Executive and Company under this Agreement shall immediately cease.
(C) ELECTION. Executive's employment may be terminated at any time
--------
by Executive upon not less than one hundred eighty (180) days written notice by
Executive to the Board. With the exception of the covenants included in
paragraph 4 above, upon such termination the obligations of Executive and
Company under this Agreement shall immediately cease.
11
<PAGE>
13. MISCELLANEOUS.
-------------
(A) PREPARATION OF AGREEMENT. It is acknowledged by each party that
------------------------
such party either had separate and independent advice of counsel or the
opportunity to avail itself or himself of same. In light of these facts it is
acknowledged that no party shall be construed to be solely responsible for the
drafting hereof, and therefore any ambiguity shall not be construed against any
party as the alleged draftsman of this Agreement.
(B) COOPERATION. Each party agrees, without further consideration,
-----------
to cooperate and diligently perform any further acts, deeds and things and to
execute and deliver any documents that may from time to time be reasonably
necessary or otherwise reasonably required to consummate, evidence, confirm
and/or carry out the intent and provisions of this Agreement, all without undue
delay or expense.
(C) INTERPRETATION.
--------------
(i) Entire Agreement/No Collateral Representations. Each party
----------------------------------------------
expressly acknowledges and agrees that this Agreement, including all exhibits
attached hereto: (1) is the final, complete and exclusive statement of the
agreement of the parties with respect to the subject matter hereof;
(2) specifically supersedes and replaces the "Employment Contract for Director
of European Sales" entered into by and between Company and Executive on March
23, 1992 as well as any prior or contemporaneous agreements, promises,
assurances, guarantees, representations, understandings, conduct, proposals,
conditions, commitments, acts, course of dealing, warranties, interpretations or
terms of any kind, oral or written (collectively and severally, the "Prior
Agreements"), and that any such prior agreements are of no force or effect
except as expressly set forth herein; and (3) may not be varied, supplemented or
contradicted by evidence of Prior Agreements, or by evidence of subsequent oral
agreements. Any agreement hereafter made shall be ineffective to modify,
supplement or discharge the terms of this Agreement, in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement of
the modification or supplement is sought.
(ii) Waiver. No breach of any agreement or provision herein
------
contained, or of any obligation under this Agreement, may be waived, nor shall
any extension of time for performance of any obligations or acts be deemed an
extension of time for performance of any other obligations or acts contained
herein, except by written instrument signed by the party to be charged or as
otherwise expressly authorized herein. No waiver of any breach of any agreement
or provision herein contained shall be deemed a waiver of any preceding or
succeeding breach thereof, or a waiver or relinquishment of any other agreement
or provision or right or power herein contained.
12
<PAGE>
(iii) Remedies Cumulative. The remedies of each party under
-------------------
this Agreement are cumulative and shall not exclude any other remedies to which
such party may be lawfully entitled.
(iv) Severability. If any term or provision of this Agreement
------------
or the application thereof to any person or circumstance shall, to any extent,
be determined to be invalid, illegal or unenforceable under present or future
laws effective during the term of this Agreement, then and, in that event: (A)
the performance of the offending term or provision (but only to the extent its
application is invalid, illegal or unenforceable) shall be excused as if it had
never been incorporated into this Agreement, and, in lieu of such excused
provision, there shall be added a provision as similar in terms and amount to
such excused provision as may be possible and be legal, valid and enforceable,
and (B) the remaining part of this Agreement (including the application of the
offending term or provision to persons or circumstances other than those as to
which it is held invalid, illegal or unenforceable) shall not be affected
thereby and shall continue in full force and effect to the fullest extent
provided by law.
(v) Time is of the Essence. It is expressly understood and
----------------------
agreed that time of performance is strictly of the essence with respect to each
and every term, condition, obligation and provision hereof and that the failure
to timely perform any of the terms, conditions, obligations or provisions hereof
by any party shall constitute a material breach and a noncurable (but waivable)
default under this Agreement by the party so failing to perform.
(vi) No Third Party Beneficiary. Notwithstanding anything else
--------------------------
herein to the contrary, the parties specifically disavow any desire or intention
to create any third party beneficiary obligations, and specifically declare that
no person or entity, other than as set forth in this Agreement, shall have any
rights hereunder or any right of enforcement hereof.
(vii) No Reliance Upon Prior Representation. The parties
-------------------------------------
acknowledge that no other party has made any oral representation or promise
which would induce them prior to executing this Agreement to change their
position to their detriment, partially perform, or part with value in reliance
upon such representation or promise; the parties acknowledge that they have
taken such action at their own risk; and the parties represent that they have
not so changed their position, performed or parted with value prior to the time
of their execution of this Agreement.
(viii) Headings; References; Incorporation; Gender. The headings
-------------------------------------------
used in this Agreement are for convenience and reference purposes only, and
shall not be used in construing or
13
<PAGE>
interpreting the scope or intent of this Agreement or any provision hereof.
References to this Agreement shall include all amendments or renewals thereof.
All cross-references in this Agreement, unless specifically directed to another
agreement or document, shall be construed only to refer to provisions within
this Agreement, and shall not be construed to be referenced to the overall
transaction or to any other agreement or document. Any exhibit referenced in
this Agreement shall be construed to be incorporated in this Agreement. As used
in this Agreement, each gender shall be deemed to include the other gender,
including neutral genders or genders appropriate for entities, if applicable,
and the singular shall be deemed to include the plural, and vice versa, as the
context requires.
(D) ENFORCEMENT.
-----------
(i) Applicable Law. This Agreement and the rights and
--------------
remedies of each party arising out of or relating to this Agreement (including,
without limitation, equitable remedies) shall be solely governed by, interpreted
under, and construed and enforced in accordance with the laws (without regard to
the conflicts of law principles thereof) of the State of California, as if this
agreement were made, and as if its obligations are to be performed, wholly
within the State of California.
(ii) Consent to Jurisdiction; Service of Process. Any
-------------------------------------------
action or proceeding arising out of or relating to this Agreement shall be filed
in and heard and litigated solely before the state courts of California located
within the County of Los Angeles. Each party generally and unconditionally
accepts the exclusive jurisdiction of such courts and to venue therein, consents
to the service of process in any such action or proceeding by certified or
registered mailing of the summons and complaint in accordance with the notice
provisions of this Agreement, and waives any defense or right to object to venue
in said courts based upon the doctrine of "Forum Non Conveniens". Each party
irrevocably agrees to be bound by any judgement rendered thereby in connection
with this Agreement.
(iii) Waiver of Right to Jury Trial. Each party hereby
-----------------------------
waives such party's respective right to a jury trial of any claim or cause of
action based upon or arising out of this Agreement. Each party acknowledges that
this waiver is a material inducement to each other party hereto to enter into
the transaction contemplated hereby, that each other party has already relied
upon this waiver in entering into this Agreement, and that each other party will
continue to rely on this waiver in their future dealings. Each party warrants
and represents that such party has reviewed this waiver with such party's legal
counsel, and that such party has knowingly and voluntarily waived its jury trial
rights following consultation with legal counsel.
14
<PAGE>
(vi) Consent to Specific Performance and Injunctive Relief and Waiver
----------------------------------------------------------------
of Bond or Security. Each party acknowledges that Company may, as a result of
- -------------------
Executive's breach of the covenants and obligations included in paragraph 4 of
this Agreement, sustain immediate and long-term substantial and irreparable
injury and damage which cannot be reasonably or adequately compensated by
damages at law. Each party agrees that in the event of Executive's breach or
threatened breach of the covenants and obligations included in paragraph 4,
Company shall be entitled to obtain from a court of competent jurisdiction or
arbitration, as the case may be under this Agreement, equitable relief,
including, without limitation, enforcement of all of the provisions of this
Agreement by specific performance and/or temporary, preliminary and/or permanent
injunctions enforcing any of Company's rights, requiring performance by
Executive, or enjoining any breach by Executive, all without proof of any actual
damages that have been or may be caused to Company by such breach or threatened
breach and without the posting of bond or other security in connection
therewith. Executive waives the claim or defense that Company has an adequate
remedy at law and Executive shall not allege or otherwise assert the legal
position that any such remedy at law exists. Each party agrees and acknowledges:
(1) that the terms of this paragraph are fair, reasonable and necessary to
protect the legitimate interests of the other party; (2) that this waiver is a
material inducement to the other party to enter into the transaction
contemplated hereby; (3) that the other party has already relied upon this
waiver in entering into this Agreement; and (4) that each party will continue to
rely on this waiver in their future dealings. Each party warrants and represents
that such party has reviewed this provision with such party's legal counsel, and
that such party has knowingly and voluntarily waived its rights following
consultation with legal counsel.
(v) Attorneys' Fees and Costs. If any party institutes or should the
-------------------------
parties otherwise become a party to any Action Or Proceeding (as defined below)
based upon or arising out of this Agreement including, without limitation, to
enforce or interpret this Agreement or any provision hereof, or for damages by
reason of any alleged breach of this Agreement or any provision hereof, or for a
declaration of rights in connection herewith, or for any other relief, including
equitable relief, in connection herewith, the Prevailing Party in any such
Action Or Proceeding, whether or not such Action Or Proceeding proceeds to final
judgement or determination, shall be entitled to receive from the non-Prevailing
Party as a cost of suit, and not as damages, all Costs And Expenses (as defined
below) of prosecuting or defending the Action Or Proceeding, as the case may be,
including, without limitation, reasonable Attorneys' And Other Fees.
(vi) Definitions. The term "Action Or Proceeding" is defined as any
-----------
and all claims, suits, actions, notices,
15
<PAGE>
inquiries, proceedings, hearings, arbitrations or other similar proceedings,
including appeals and petitions therefrom, whether formal or informal,
governmental or non-governmental, or civil or criminal. The term "Prevailing
Party" is defined as the party who is determined to prevail by the Court after
its consideration of all damages and equities in the Action Or Proceeding,
whether or not the Action Or Proceeding proceeds to final judgment. The Court
shall retain the discretion to determine that no party is the Prevailing Party
in which case no party shall be entitled to recover its Costs And Expenses under
this subparagraph 12(d). The term "Attorneys' And Other Fees" is defined as
attorneys' fees, accountants' fees, fees of other professionals, witness fees
(including experts engaged by the parties, but excluding shareholders, officers,
employees or partners of the parties), and any and all other similar fees
incurred in the prosecution or defense of the Action Or Proceeding. The term
"Costs And Expenses" is defined as the cost to take depositions, the cost to
arbitrate this dispute, if applicable, and the costs and expenses of travel and
lodging incurred with respect to the Action Or Proceeding, provided, however,
the party incurring said travel and lodging expense must ordinarily travel over
one hundred (100) miles, one way, from his or her residence in incurring such
expense.
(E) NO ASSIGNMENT OF RIGHTS OR DELEGATION OF DUTIES BY EXECUTIVE.
------------------------------------------------------------
Executive's rights and benefits under this Agreement are personal to him and
therefore (i) no such right or benefit shall be subject to voluntary or
involuntary alienation, assignment or transfer; and (ii) Executive may not
delegate his duties or obligations hereunder.
(F) NOTICES. Unless otherwise specifically provided in this
-------
Agreement, all notices, demands, requests, consents, approvals or other
communications (collectively and severally called "Notices") required or
permitted to be given hereunder, or which are given with respect to this
Agreement, shall be in writing, and shall be given by: (A) personal delivery
(which form of Notice shall be deemed to have been given upon delivery), (B) by
telegraph or by private airborne/overnight delivery service (which forms of
Notice shall be deemed to have been given upon confirmed delivery by the
delivery agency), (C) by electronic or facsimile or telephonic transmission,
provided the receiving party has a compatible device or confirms receipt thereof
(which forms of Notice shall be deemed delivered upon confirmed transmission or
confirmation of receipt), or (D) by mailing in the United States mail by
registered or certified mail, return receipt requested, postage prepaid (which
forms of Notice shall be deemed to have been given upon the fifth {5th} business
day following the date mailed). Each party, and their respective counsel, hereby
agree that if Notice is to be given hereunder by such party's counsel, such
counsel may communicate directly with all principals, as required to comply with
the foregoing notice provisions. Notices shall be addressed to the address
hereinabove set forth in the introductory
16
<PAGE>
paragraph of this Agreement, or to such other address as the receiving party
shall have specified most recently by like Notice, with a copy to the other
parties hereto. Any Notice given to the estate of a party shall be sufficient if
addressed to the party as provided in this subparagraph.
(G) COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument, binding on all parties hereto. Any
signature page of this Agreement may be detached from any counterpart of this
Agreement and reattached to any other counterpart of this Agreement identical in
form hereto by having attached to it one or more additional signature pages.
(H) EXECUTION BY ALL PARTIES REQUIRED TO BE BINDING; ELECTRONICALLY
---------------------------------------------------------------
TRANSMITTED DOCUMENTS. This Agreement shall not be construed to be an offer and
- ---------------------
shall have no force and effect until this Agreement is fully executed by all
parties hereto. If a copy or counterpart of this Agreement is originally
executed and such copy or counterpart is thereafter transmitted electronically
by facsimile or similar device, such facsimile document shall for all purposes
be treated as if manually signed by the party whose facsimile signature appears.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
26th day of May, 1996.
EXECUTIVE: COMPANY:
STAAR SURGICAL COMPANY, a Delaware
corporation
/s/ Donald D. Ferguson
- ------------------------ BY: /s/ John R. Wolf
Donald D. Ferguson -------------------------
17
<PAGE>
EXHIBIT 21
List of Significant Subsidiaries
Name County of Organization
---- ----------------------
STAAR Surgical AG Switzerland
Canon STARR Japan
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 26th day of March, 1997.
/s/ Donald R. Sanders
-------------------------------
Donald R. Sanders
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 25th day of March, 1997.
/s/ John R. Wolf
-------------------------------
John R. Wolf
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 26th day of March, 1997.
/s/ Michael R. Deitz, M.D.
-------------------------------
Michael R. Deitz, M.D.
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 25th day of March, 1997.
/s/ Andrew F. Pollet
-------------------------------
Andrew F. Pollet
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 26th day of March, 1997.
/s/ Peter J. Utrata
-------------------------------
Peter J. Utrata, M.D.
<PAGE>
POWER OF ATTORNEY
OF OFFICERS AND/OR DIRECTORS OF
STAAR SURGICAL COMPANY
The undersigned officer and/or director of Staar Surgical Company, a
Delaware corporation (the "Corporation"), which anticipates filing, with respect
to its fiscal year ending January 3, 1997, an Integrated Annual Report on Form
10-K ("Report") with the Securities and Exchange Commission, Washington, D.C.,
hereby constitutes and appoints John R. Wolf and William Huddleston and each of
them, severally, with full power of substitution and resubstitution, as
attorneys or attorney to sign for the undersigned in any and all capacities such
Report, and any and all applications or other documents to be filed pertaining
to such Report with the Securities and Exchange Commission and with full power
and authority to do and perform any and all acts and things whatsoever required
and necessary to be done in the premises, as fully to all intents and purposes
as the undersigned could do if personally present. The undersigned hereby
ratifies and confirms all that said attorneys-in-fact and agents, or any of
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
EXECUTED this 25th day of March, 1997.
/s/ William C. Huddleston
-------------------------------
William C. Huddleston
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