                                                                    EXHIBIT 10.1
                                                                    ------------

                 SECOND AMENDED AND RESTATED CREDIT AGREEMENT
                 --------------------------------------------

      THIS  AGREEMENT  is  entered  into as of March 26,  2003 by and  between
STAAR SURGICAL COMPANY, a Delaware corporation  ("Borrower"),  and WELLS FARGO
BANK, NATIONAL ASSOCIATION, a national banking association ("Bank").

                                   Recital

      Borrower  and Bank have  entered  into an Amended  and  Restated  Credit
Agreement  dated as of March 29,  2002,  as  amended by a First  Amendment  to
Amended and Restated Credit  Agreement dated July 31, 2002, a Second Amendment
to Amended and Restated  Credit  Agreement  dated October 25, 2002 and a Third
Amendment to Amended and Restated  Credit  Agreement  dated  November 25, 2002
(said Agreement,  as so amended,  herein called the "Prior Credit Agreement"),
pursuant to which Borrower  remains indebted to Bank under a line of credit in
the  maximum  principal  amount of  $3,000,000  as of  February  28, 2003 (the
"Prior  Line of  Credit"),  which is  evidenced  by an  Amended  and  Restated
Revolving  Line of Credit Note dated July 31, 2002 (the "Prior Line of Credit
Note").  The Prior  Line of Credit  Note  matures on March 31,  2003,  and the
outstanding  balance  under the Prior  Line of Credit as of March 21,  2003 is
$2,253,660.06  in principal,  plus accrued but unpaid  interest.  Borrower has
requested  that Bank extend the  maturity  date of and  restructure  the Prior
Line of  Credit,  and  Bank has  agreed  to do so  subject  to the  terms  and
conditions contained herein.

      NOW, THEREFORE, for valuable consideration,  the receipt and sufficiency
of which are hereby  acknowledged,  Borrower and Bank hereby agree that all of
the terms and  conditions of the Prior Credit  Agreement and the Prior Line of
Credit Note shall be and hereby are amended,  restated and  superseded  by the
terms and conditions of this Agreement;  provided,  however,  that (1) nothing
herein shall  terminate any security  interest in favor of Bank,  and all such
security  interests  shall  remain in full force and effect,  and (2) upon the
Effective  Date (as defined  below),  all references in the Loan Documents (as
defined below) to the Prior Credit  Agreement shall be deemed to be references
to this Agreement.  Borrower and Bank further agree as set forth below.

                                  ARTICLE I
                                  ---------
                                 CREDIT TERMS
                                 ------------

      SECTION 1.1.      LINE OF CREDIT.

            (a) Line of Credit.  Subject to the terms and  conditions  of this
Agreement,  Bank hereby  agrees to make advances to Borrower from time to time
up to and  including  March 31, 2004,  not to exceed at any time the aggregate
principal  amount of $3,000,000 (the "Line of Credit"),  the proceeds of which
shall  be used for  Borrower's  general  corporate  purposes  in the  ordinary
course of its business,  including,  without limitation, for lending to direct
or indirect  subsidiaries  (each a "Subsidiary") of Borrower for their general
corporate  purposes  in the  ordinary  course  of their  business.  Borrower's
obligation to repay  advances under the Line of Credit shall be evidenced by a
promissory note  substantially  in the form of Exhibit A  attached hereto (the
"Line of Credit  Note"),  all terms of which are  incorporated  herein by this
reference.  Advances,  interest, fees and other amounts outstanding or accrued
under  the  Prior  Line of  Credit as of the  Effective  Date (as  defined  in

                                      -1-
<PAGE>


Section  3.1  below)  of  this  Agreement  shall  be  deemed  to be  advances,
interest, fees and other amounts outstanding or accrued,  respectively,  under
the Line of Credit.

            (b)  Borrowing  and  Repayment.  Borrower  may  from  time to time
during the term of the Line of Credit  borrow,  partially  or wholly repay its
outstanding  borrowings,  and  reborrow,  subject  to all of the  limitations,
terms  and  conditions  contained  herein  or in  the  Line  of  Credit  Note;
provided,  however,  that the total  outstanding  borrowings under the Line of
Credit  shall not at any time exceed the maximum  principal  amount  available
thereunder, as set forth above.

      SECTION 1.2.      INTEREST/FEES.

            (a) Interest.  The outstanding  principal  balance of each advance
hereunder  shall bear  interest  at a rate per annum equal at all times to the
sum of the Prime Rate in effect from time to time plus 5.00%.

            (b) Prime  Rate.  The term  "Prime  Rate"  shall  mean at any time
the rate of interest  most  recently  announced  within Bank at its  principal
office as its "prime rate," with the  understanding  that such "prime rate" is
one of Bank's base rates,  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  in  such  internal   publication   or
publications  as Bank may  designate.  Each  change  in the  rate of  interest
shall become  effective on the date each Prime Rate change is announced within
Bank.

            (c)  Computation  and Payment.  Interest  shall be computed on the
basis of a 360-day  year and actual days  elapsed.  Interest  shall be payable
at the times and place set forth in each promissory  note or other  instrument
required hereby.

            (d)  Unused-Commitment  Fee.  Borrower shall pay Bank a fee at the
rate of 1.25% per annum,  computed  on the basis of a 360-day  year and actual
days elapsed,  on the average daily unused amount of the Line of Credit,  from
the  date  hereof  until  the  maturity  date of the Line of  Credit,  payable
monthly  in  arrears  on the  first  business  day  of  each  calendar  month,
commencing on April 1, 2003, and on the maturity date of the Line of Credit.

            (e)  Restructuring  and  Extension  Fee.  Borrower  shall pay Bank
Bank a  restructuring  and  extension  fee in an amount equal to $100,000 in the
following  manner:  $30,000 shall be due and payable on the  Effective  Date and
$70,000 shall be due and payable on December 31, 2003; provided, however, if all
of the advances,  interest,  fees and other amounts outstanding or accrued under
this  Agreement  and the  other  Loan  Documents  are paid in full on or  before
December 31, 2003 and the Line of Credit is terminated, then the $70,000 fee due
on December 31, 2003 shall be waived and Borrower  shall have no  obligation  to
pay such fee. The restructuring and extension fee shall be deemed earned in full
on the Effective Date.

      SECTION 1.3.  COLLECTION  OF  PAYMENTS.   Borrower  authorizes  Bank  to
collect all principal,  interest and fees due hereunder by charging Borrower's
deposit  account number  4159-251172  with Bank, or any other deposit  account
maintained by Borrower with Bank,  for the full amount  thereof.  Should there
be  insufficient  funds in any such deposit  account to pay all such sums when
due, the full amount of such  deficiency  shall be immediately due and payable
by Borrower.

                                      -2-
<PAGE>
      SECTION 1.4.  MANDATORY PREPAYMENT.

            (a)  Application  of  Proceeds.  Borrower  will,  on each  date of
receipt  by  Borrower,  or by any  Subsidiary  of  Borrower,  of (i) Net  Cash
Proceeds  (as  defined  below)  from  the  sale,  lease,   transfer  or  other
disposition  of any  asset  of  Borrower  or any  Subsidiary  thereof  that is
prohibited  by  Section  5.5(d),  (ii)  Net  Cash  Proceeds  from  the sale or
issuance of any equity  interests in Borrower or any  Subsidiary  thereof,  or
any  warrants,  options or other rights to acquire any such equity  interests,
(iii) Net Cash  Proceeds  from the  incurrence  by Borrower or any  Subsidiary
thereof of any  indebtedness not permitted by Section 5.4 or (iv) insurance or
condemnation  proceeds  from any  casualty or  condemnation  in respect of any
asset of Borrower  or any  Subsidiary  thereof  (except to the extent that any
such proceeds in respect of a single  casualty or  condemnation  do not exceed
$10,000  (or the  equivalent  in one or more  currencies)  in the  aggregate),
prepay an aggregate  principal  amount of the advances  outstanding  hereunder
equal to the amount of such Net Cash  Proceeds or  insurance  or  condemnation
proceeds.  All  prepayments  pursuant  to this  Section  1.4(a)  shall be made
together  with  accrued  interest  to  the  date  of  such  prepayment  on the
principal  amount prepaid.  Whether or not the applicable Net Cash Proceeds or
insurance or condemnation  proceeds exceed the aggregate  principal  amount of
advances  then  outstanding  hereunder  in any case in which a  prepayment  is
required hereunder,  the Line of Credit shall be automatically and permanently
reduced  by the  amount  equal to such  Net  Cash  Proceeds  or  insurance  or
condemnation proceeds.

            (b)  Net  Cash  Proceeds.  As used  herein,  "Net  Cash  Proceeds"
means (a) with respect to any sale,  lease,  transfer or other  disposition of
any asset by any  entity,  the  difference  between (i) the  aggregate  amount
received  by such  entity  in cash or  cash  equivalents  (including,  without
limitation,  any cash or cash equivalents  received by way of deferred payment
pursuant to a note receivable,  other noncash consideration or otherwise,  but
only as and when such cash or cash  equivalents are so received) in connection
with such transaction,  minus (ii) the sum of (A) the reasonable and customary
fees,  commissions and other out-of-pocket expenses incurred by such entity in
connection with such transaction  (other than amounts payable to affiliates of
such entity),  (B) indebtedness  (other than the advances  hereunder) required
to be paid as a result of such  transaction  and (C) federal,  state and local
taxes incurred and paid in connection with such transaction;  (b) with respect
to  any  sale  or  issuance  of  any  equity  interests  (including,   without
limitation,  stock, member interests or partnership  interests) in any entity,
or any  warrants,  options or other  rights to acquire  such equity  interests
(including,  without limitation,  any convertible securities),  by any entity,
the amount equal to the difference  between (i) the aggregate  amount received
by such entity in cash or cash  equivalents  (including,  without  limitation,
any cash or cash  equivalents  received by way of deferred payment pursuant to
a note receivable,  other noncash consideration or otherwise,  but only as and
when such cash or cash  equivalents  are so received) in connection  with such
transaction,  minus (ii) the reasonable and customary  fees,  commissions  and
other  out-of-pocket  expenses incurred by such entity in connection with such
transaction  (other than amounts  payable to affiliates  of such entity);  and
(c)  with  respect  to any  incurrence  of  indebtedness  by any  entity,  the
difference  between (i) the aggregate  amount  received by such entity in cash
or cash  equivalents in connection with such  transaction,  minus (ii) the sum
of (A) the reasonable and customary fees,  commissions and other out-of-pocket
expenses  incurred and paid or payable by such entity in connection  with such
transaction  (other than amounts payable to affiliates of such entity) and (B)
indebtedness  (other  than the  advances  hereunder)  required to be paid as a
result of such transaction.

            (c)  Overadvances.  If at any time the aggregate  principal amount
of advances  outstanding  under this  Agreement  exceeds the maximum amount of

                                      -3-
<PAGE>

the Line of Credit,  Borrower will immediately,  without any notice or request
by Bank, repay the advances in the amount equal to such excess.

      SECTION 1.5   COLLATERAL.  As security for all  indebtedness of Borrower
to Bank subject hereto,  Borrower hereby grants to Bank security  interests of
first  priority in all of Borrower's  right,  title and interest in and to the
following,  whether now owned or hereafter acquired,  whether now or hereafter
existing,  and wherever located: all account  receivables,  rights to payment,
general  intangibles,  patents,  copyrights,   trademarks,  deposit  accounts,
chattel  paper,  instruments,   documents,  inventory,  equipment,  investment
property  (including,  without  limitation,  all  stock of,  and other  equity
interests in, Borrower's  Subsidiaries),  letter-of-credit  rights, letters of
credit and money.  All of the  foregoing  shall be  further  evidenced  by and
subject  to  the  terms  of  such  further  security   agreements,   financing
statements and other documents as Bank shall reasonably  require,  all in form
and  substance  satisfactory  to  Bank,  including,   without  limitation,   a
Continuing  Security  Agreement--Rights  to Payment and  Inventory  dated as of
January 13,  2000,  a Stock  Pledge  Agreement  dated as of March 14,  2002, a
Copyright  Security  Agreement  dated as of March 29, 2002, a Patent  Security
Agreement dated as of March 29, 2002 and a Trademark  Security Agreement dated
as of March  29,  2002.  Without  limiting  the  generality  of the  foregoing
sentence,   Borrower   shall  deliver  such  pledge   agreements,   documents,
instruments,  opinions  and  filings  as Bank shall  require  to  perfect  the
security  interest  in the stock of a foreign  Subsidiary  of  Borrower  under
relevant  applicable  foreign law.  Borrower shall reimburse Bank  immediately
upon demand for all costs and  expenses  incurred by Bank in  connection  with
any of the  foregoing  security,  including,  without  limitation,  filing and
recording  fees  and  costs  of   appraisals,   audits   (including,   without
limitation, pursuant to Section 4.2 hereof) and title insurance.

                                  ARTICLE II
                                  ----------
                        REPRESENTATIONS AND WARRANTIES
                        ------------------------------

      Borrower  makes the following  representations  and  warranties to Bank,
which  representations  and  warranties  shall  survive the  execution of this
Agreement  and shall  continue  in full  force and  effect  until the full and
final payment, and satisfaction and discharge,  of all obligations of Borrower
to Bank subject to this Agreement.

      SECTION 2.1.      LEGAL  STATUS.   Borrower  is  a   corporation,   duly
organized  and  existing and in good  standing  under the laws of the State of
Delaware and is qualified or licensed to do business  (and is in good standing
as a foreign  corporation,  if applicable) in all  jurisdictions in which such
qualification  or  licensing is required or in which the failure to so qualify
or to be so licensed could have a material adverse effect on Borrower.

      SECTION 2.2.      AUTHORIZATION  AND VALIDITY.  This  Agreement and each
promissory note, security agreement,  contract,  instrument and other document
required  hereby  or at any time  hereafter  delivered  to Bank in  connection
herewith    including,    without    limitation,    a   Continuing    Security
Agreement--Rights  to Payment and  Inventory  dated as of January 13,  2000,  a
Stock  Pledge  Agreement  dated as of March 14,  2002,  a  Copyright  Security
Agreement dated as of March 29, 2002, a Patent Security  Agreement dated as of
March 29, 2002 and a Trademark  Security  Agreement dated as of March 29, 2002
(collectively  the "Loan  Documents") have been duly authorized,  executed and
delivered and constitute legal,  valid and binding  agreements and obligations
of Borrower or the party which  executed the same,  enforceable  in accordance
with  their  respective  terms  or,  upon  their  execution  and  delivery  in
accordance  with the  provisions  hereof,  will  constitute  legal,  valid and

                                      -4-
<PAGE>

binding  agreements  and  obligations  of Borrower or the party which executes
the same, enforceable in accordance with their respective terms.

      SECTION 2.3.      NO   VIOLATION.    The    execution,    delivery   and
performance  by  Borrower  of each of the Loan  Documents  do not  violate any
provision  of any  law or  regulation,  or  contravene  any  provision  of the
Certificate of  Incorporation  or Bylaws of Borrower,  or result in any breach
of or default under any contract,  obligation,  indenture or other  instrument
to which Borrower is a party or by which Borrower may be bound.

      SECTION 2.4.      LITIGATION.  There are no  pending  or, to the best of
Borrower's knowledge,  threatened actions,  claims,  investigations,  suits or
proceedings  by or before any  governmental  authority,  referee,  arbitrator,
court or  administrative  agency which could have a material adverse effect on
the financial  condition or operation of Borrower,  other than those disclosed
by Borrower to Bank in writing prior to the date hereof.

      SECTION 2.5.      CORRECTNESS  OF FINANCIAL  STATEMENTS.  The  financial
statements of Borrower  dated February 28, 2003, a true copy of which has been
delivered by Borrower to Bank prior to the date hereof,  (a) are  complete and
correct and present fairly the financial  condition of Borrower,  (b) disclose
all  liabilities  of Borrower  that are  required to be  reflected or reserved
against under generally accepted accounting principles,  whether liquidated or
unliquidated,  fixed or  contingent,  and (c) have been prepared in accordance
with generally accepted  accounting  principles  consistently  applied.  Since
the date of such  financial  statements  there  has been no  material  adverse
change in the  financial  condition of Borrower,  nor has Borrower  mortgaged,
pledged,  granted a security  interest in or otherwise  encumbered  any of its
assets or  properties,  except in favor of Bank or as  otherwise  permitted by
Bank in writing.

      SECTION 2.6.      INCOME-TAX  RETURNS.  Borrower has no knowledge of any
pending  assessments  or adjustments of its income tax payable with respect to
any year.

      SECTION 2.7.      NO  SUBORDINATION.  There is no agreement,  indenture,
contract or instrument to which  Borrower is a party or by which  Borrower may
be bound  that  requires  the  subordination  in right  of  payment  of any of
Borrower's  obligations  subject to this Agreement to any other  obligation of
Borrower.

      SECTION 2.8.      PERMITS,  FRANCHISES.  Borrower  possesses,  and  will
hereafter possess, any and all permits,  consents,  approvals,  franchises and
licenses  required,  and  any and  all  rights  to  trademarks,  trade  names,
patents,  copyrights and fictitious names  necessary,  to enable it to conduct
the business in which it is now engaged, in compliance with applicable law.

      SECTION 2.9.      ERISA.  Borrower  is in  compliance  in  all  material
respects  with all  applicable  provisions of the Employee  Retirement  Income
Security Act of 1974,  as amended or recodified  from time to time  ("ERISA").
Borrower  has not  violated  any  provision  of any defined  employee  pension
benefit plan (as defined in ERISA)  maintained or  contributed  to by Borrower
(each,  a "Plan").  No  Reportable  Event as defined in ERISA has occurred and
is  continuing  with respect to any Plan  initiated by Borrower.  Borrower has
met its minimum  funding  requirements  under ERISA with respect to each Plan.
Each Plan will be able to fulfill its benefit  obligations as they come due in
accordance  with the Plan  documents  therefor  and under  generally  accepted
accounting principles.

                                      -5-
<PAGE>

      SECTION 2.10.     OTHER  OBLIGATIONS.  Borrower is not in default on any
obligation  for borrowed  money,  any  purchase-money  obligation or any other
material lease, commitment, contract, instrument or obligation.

      SECTION 2.11.     ENVIRONMENTAL   MATTERS.   Except  as   disclosed   by
Borrower  to  Bank  in  writing  prior  to the  date  hereof,  Borrower  is in
compliance  in all material  respects  with all  applicable  federal and state
environmental,  hazardous-waste,  health and safety statutes,  and any and all
rules or regulations  adopted pursuant thereto,  which govern or affect any of
Borrower's operations and/or properties,  including,  without limitation,  the
Comprehensive Environmental Response,  Compensation and Liability Act of 1980,
the  Superfund  Amendments  and  Reauthorization  Act  of  1986,  the  Federal
Resource  Conservation  and  Recovery  Act of  1976,  and  the  Federal  Toxic
Substances  Control  Act,  as any of the  same  may be  amended,  modified  or
supplemented  from time to time.  None of the  operations  of  Borrower is the
subject of any federal or state investigation  evaluating whether any remedial
action  involving a material  expenditure is needed to respond to a release of
any toxic or hazardous waste or substance into the  environment.  Borrower has
no material  contingent  liability in connection with any release of any toxic
or hazardous waste or substance into the environment.

      SECTION 2.12.     PATENTS.  No  patent  has been  issued  in the  United
States to or for the benefit of, and no patent  application  has been filed in
the United  States by or on behalf of,  Borrower  or any  Subsidiary  thereof,
except as listed on Schedule A to the Patent  Security  Agreement  dated as of
March 29, 2002 between Borrower and Bank or as otherwise  disclosed to Bank in
writing from time to time.

      SECTION 2.13      CREDIT  FACILITIES.   Since  September  30,  2001,  no
credit  facility  has been  available  to Borrower or any  Subsidiary  thereof
except  for (a)  the  credit  facility  made  available  to  Borrower  by Bank
pursuant  to this  Agreement  or the Prior  Credit  Agreement,  (b) the credit
facility made  available to Staar  Surgical AG, a Swiss  corporation  ("Swiss
Sub"),  by UBS AG, (c) a credit  facility made  available to Domilens  GmbH, a
German corporation  ("Domilens"),  in an amount not exceeding $500,000 (or the
equivalent  in one or more  currencies)  and (d) such other credit  facilities
(including,  without limitation,  the principal terms thereof) as disclosed by
Borrower to Bank in writing from time to time.

                                 ARTICLE III
                                 -----------
                                  CONDITIONS
                                  ----------

      SECTION 3.1.      CONDITIONS  TO  EFFECTIVENESS.  This  Agreement  shall
become  effective  on the date  (the  "Effective  Date")  on which  all of the
conditions specified below have been fulfilled to Bank's satisfaction.

            (a) Approval of Bank  Counsel.  All legal  matters  incidental  to
the effectiveness of this Agreement shall be satisfactory to Bank's counsel.

            (b)  Documentation.   Bank  shall  have  received,   in  form  and
substance  satisfactory to Bank,  each of the following,  duly executed by the
parties thereto (other than Bank):

                  (i)   this Agreement and the Line of Credit Note;

                                      -6-
<PAGE>

                  (ii)  a  certificate  of the  President  or Chief  Financial
Officer of Borrower and the  Secretary of Borrower  certifying  (A) that there
has been no amendment to Borrower's  charter  documents  since the delivery to
Bank of an  Officers'  Certificate  dated March 29,  2002  pursuant to Section
3.1(b)(iv) of the Prior Credit Agreement (the "Prior Officers'  Certificate"),
(B) that there has been no amendment to  Borrower's  bylaws since the delivery
to Bank of the  Prior  Officers'  Certificate,  (C) that  Borrower  is in good
standing   in  the  States  of   Delaware   and   California,   (D)  that  the
representations  and  warranties of Borrower  contained in the Loan  Documents
are correct on and as of the  Effective  Date as though made on and as of such
date,  (E) that no Event of Default  (as  defined in  Section  6.1  hereof) or
event that,  with the giving of notice or the  passage of time or both,  would
constitute  an Event of Default has  occurred  and is  continuing  or would be
caused by the  effectiveness  of this  Agreement and (F) that attached to such
certificate is Borrower's current financial projections; and

                  (iii) such other documents as Bank may require.

            (c)  Financial  Condition.  There  shall  have  been  no  material
adverse change, as determined by Bank, in the financial  condition or business
of Borrower.

            (d)  Fee,  Etc.  Borrower  shall  have  paid to  Bank,  by  Bank's
debiting  of one or more of  Borrower's  deposit  accounts  with  Bank,  (i) a
restructuring  and  extension  fee of  $30,000.00  and (ii) all other  amounts
payable to Bank pursuant to this Agreement or otherwise,  to the extent that a
statement for the same has been delivered to Borrower.

      SECTION 3.2.      CONDITIONS   OF  EACH   EXTENSION   OF   CREDIT.   The
obligation  of Bank to make each  extension  of credit  requested  by Borrower
hereunder shall be subject to the  fulfillment to Bank's  satisfaction of each
of the conditions set forth below.

            (a)  Compliance.  The  representations  and  warranties  contained
herein and in each of the other Loan Documents  shall be true on and as of the
date of the signing of this  Agreement  and on the date of each  extension  of
credit  by  Bank  pursuant  hereto,  with  the  same  effect  as  though  such
representations  and warranties had been made on and as of each such date, and
on each such date no Event of Default,  and no condition,  event or act which,
with the giving of notice or the passage of time or both,  would constitute an
Event of Default, shall have occurred and be continuing or shall exist.

            (b)  Documentation.   Bank  shall  have  received  all  additional
documents  which may be required  thereby in connection with such extension of
credit.

      SECTION 3.3.      CERTAIN  DELIVERIES  AFTER EFFECTIVE DATE. By no later
than  April  30,  2003,  Bank  shall  have  received,  in form  and  substance
satisfactory to Bank, each of the following:

            (a) one   or  more   certificates   from  the  State  of  Delaware
certifying  that  (i) the copy of  Borrower's  charter  documents,  including,
without  limitation,  all amendments,  attached to such certificate is correct
and complete,  (ii) Borrower has paid all franchise  taxes to the date of such
certificate  and (iii)  Borrower  is duly  incorporated  and in good  standing
under the laws of the State of Delaware;

            (b) a good-standing  certificate and a tax-status  certificate with
respect to Borrower from the State of California;

                                      -7-
<PAGE>

            (c) a copy  of  the  resolutions  of the  Board  of  Directors  of
Borrower  authorizing  (i) the  execution,  delivery and  performance  of this
Agreement  and the other Loan  Documents to which it is or will be a party and
(ii) the  borrowings  contemplated  hereunder,  certified by the  Secretary of
Borrower,  which  certificate  states that such resolutions  thereby certified
have not been  amended,  modified,  revoked or rescinded and are in full force
and effect;

            (d) a certificate  of the  Secretary of Borrower  certifying as to
the  incumbency and specimen  signature of each officer of Borrower  executing
any Loan  Document or any other  document  delivered  in  connection  herewith
and a  certificate  of  another  officer  of  Borrower  certifying  as to  the
incumbency and specimen signature of the Secretary of Borrower;

            (e)  evidence of insurance coverage on all of Borrower's
property, in form, substance, amounts, covering risks and issued by companies
satisfactory to Bank and, where required by Bank, with loss-payable
endorsements in favor of Bank; and

            (f)  copies of all legal documentation relating to the credit
facility made available to Swiss Sub by UBS AG.

                                  ARTICLE IV
                                  ----------
                            AFFIRMATIVE COVENANTS
                            ---------------------

      Borrower  covenants  that,  so long as Bank remains  committed to extend
credit to  Borrower  pursuant  hereto or any  liabilities  (whether  direct or
contingent,  liquidated or  unliquidated) of Borrower to Bank under any of the
Loan  Documents  remain  outstanding,   and  until  payment  in  full  of  all
obligations of Borrower subject hereto,  Borrower shall, unless Bank otherwise
consents in writing, observe all of the affirmative covenants set forth below.

      SECTION 4.1.      PUNCTUAL  PAYMENTS.  Borrower shall punctually pay all
principal,  interest,  fees and other liabilities due under the Loan Documents
at the applicable time and place, and in the manner, specified therein.

      SECTION 4.2.      ACCOUNTING  RECORDS.  Borrower shall maintain adequate
books and records in accordance with generally accepted accounting  principles
consistently  applied  and shall  permit any  representative  of Bank,  at any
reasonable  time,  to inspect,  audit and examine such books and  records,  to
make copies of the same and to inspect the properties of Borrower,  including,
without  limitation,  for the  purpose of (a)  conducting  collateral  audits,
either by Bank or an outsider auditor retained thereby,  at least semiannually
with the first such audit to be performed in the second  quarter of 2003,  and
(b) conducting  patent audit updates,  by Ernst & Young LLP or another outside
auditor  retained  by  Bank,  to  update,  among  other  things,  the  reports
previously  prepared concerning the market value and orderly liquidation value
of the patents of Borrower and its Subsidiaries.

      SECTION 4.3.      FINANCIAL  STATEMENTS AND OTHER INFORMATION.  Borrower
shall provide to Bank all of the  following,  in form and detail  satisfactory
to Bank:

            (a) as soon as  available  and in any event  within 90 days  after
the end of each fiscal year of Borrower,  the  consolidated  balance  sheet of
Borrower and its consolidated  Subsidiaries as of the end of such year and the
related  consolidated  statements  of  income,  cash  flows and  shareholders'
equity of Borrower and its consolidated  Subsidiaries  for such year,  setting

                                      -8-
<PAGE>

forth in each  case in  comparative  form the  corresponding  figures  for the
preceding fiscal year,  together in each case with (i) an unqualified  opinion
thereon of  independent  public  accountants  acceptable  to Bank stating that
such  financial  statements  present  fairly,  in all material  respects,  the
consolidated  financial  condition  and results of  operations of Borrower and
its   consolidated   Subsidiaries  in  conformity   with  generally   accepted
accounting  principles  as of the end of, and for,  the period  presented  and
(ii) a copy of any letter of such  accountants  to the  management of Borrower
in connection with such financial  statements  (except that the letter of such
accountants to the management of Borrower in connection  with  Borrower's 2002
financial statements may be delivered pursuant to Section 4.3(i));

            (b) as soon as  available  and in any event  within 45 days  after
the end of each of the first  three  quarterly  fiscal  periods of each fiscal
year of Borrower,  the  unaudited  consolidated  balance sheet of Borrower and
its  consolidated  Subsidiaries  as of the end of such  period and the related
unaudited  consolidated  statements  of income and cash flows of Borrower  and
its  consolidated  Subsidiaries  for the three, six or nine months then ended,
as set forth in Borrower's  quarterly  reports on Form 10-Q,  together in each
case with a certificate  of the Chief  Financial  Officer of Borrower  stating
that such financial  statements present fairly, in all material respects,  the
consolidated  financial position and results of operations of Borrower and its
consolidated  Subsidiaries  in conformity with generally  accepted  accounting
principles as of the end of, and for, the period presented  (subject to normal
year-end audit adjustments and the absence of footnotes);

            (c)  promptly  upon  Borrower's  filing  thereof  with the  United
States  Securities and Exchange  Commission,  a copy of each document so filed
by Borrower pursuant to the Securities Exchange Act of 1934;

            (d) within 45 days after the end of each fiscal  month,  unaudited
consolidated  and  consolidating  balance  sheets of Borrower as of the end of
such month and unaudited  consolidated and consolidating  statements of income
and cash flows of  Borrower  for such month and for the period  commencing  at
the end of the  preceding  fiscal  year and ending with the end of such month,
all in form,  scope and detail  satisfactory to Bank and duly certified by the
Chief  Financial  Officer of Borrower as having  been  prepared in  accordance
with generally  accepted  accounting  principles  (subject to normal  year-end
audit  adjustments  and the absence of footnotes),  together in each case with
(i) a  narrative  discussion  and  analysis  by such  officer  concerning  the
financial  performance  of  Borrower,  and any  variance of more than 10% from
Borrower's  projections  which has been  delivered to Bank as an attachment to
the officers'  certificate  pursuant to Section 3.1(b)(ii),  evidenced by such
financial  statements  and  (ii)  a  duly  completed  Compliance   Certificate
executed by the Chief Financial Officer of Borrower  substantially in the form
of Exhibit B hereto or otherwise in form and scope acceptable to Bank;

            (e)  not  later  than  Friday  of  each  calendar   week,   (i)  a
projection of the consolidated cash flow of Borrower,  detailing cash receipts
and cash  disbursements,  for the 13-week period commencing on such Friday and
(ii) a  comparison  of  Borrower's  actual  consolidated  cash  flow  for  the
immediately  preceding week to the projection of such cash flow, together with
a written  explanation  of any variance  exceeding  10%, in each case in form,
scope and  detail  satisfactory  to Bank and duly  certified  by an officer of
Borrower, and in a manner, acceptable to Bank;

            (f)  within  45  days  after  the end of  each  semiannual  fiscal
period of Borrower,  commencing  with such period  ending on June 30, 2003, an
aged listing of the United  States  domestic  accounts  receivable  and United
States  domestic  accounts  payable of Borrower and its United States domestic

                                      -9-
<PAGE>

Subsidiaries  as of the last day of such  period,  in form,  scope and  detail
satisfactory  to Bank and duly  certified by an officer of Borrower,  and in a
manner, acceptable to Bank;

            (g)  promptly  (i) upon  Borrower's  becoming  aware of the  same,
notice of any  declination  by UBS AG to extend its credit  facility for Swiss
Sub and (ii) upon  execution  of the same,  copies  of (A) all  amendments  or
restatements  of the loan  agreement  between Swiss Sub and UBS AG and (B) all
other  documents  executed by Swiss Sub,  Borrower or any  affiliate of either
thereof in connection with such loan agreement;

            (h)  within  45  days  after  the end of  each  semiannual  fiscal
period of Borrower,  commencing  with such period ending on June 30, 2003, (i)
written  notice in  reasonable  detail of the filing during such period of any
application  by or on behalf of Borrower or any  Subsidiary  thereof  with the
United States Patent and Trademark Office,  the United States Copyright Office
or any other office with respect to, or the acquisition  during such period by
Borrower or any  Subsidiary  thereof of any  interest in  (including,  without
limitation,  any  interest as  exclusive  licensee),  any  patent,  trademark,
copyright or other  intellectual  property,  together with upon the request of
Bank  a  copy  of  such  application  or  the  documentation  concerning  such
acquisition,  as  applicable,  and (ii) in the  event  that no such  filing or
acquisition  has been made during such period,  a certificate  executed by the
Chief Financial Officer of Borrower certifying to that effect;

            (i)  not  later  than  September  30,  2003,  copy  of the  letter
prepared by  independent  public  accountants of Borrower to the management of
Borrower  in  connection  with   Borrower's  2002  annual  audited   financial
statements; and

            (j)  promptly  upon  request  by  Bank,  such  other   information
concerning  the  business,  condition  (financial or  otherwise),  operations,
performance,  properties or prospects of Borrower or any Subsidiary thereof as
Bank may from time to time reasonably request (including,  without limitation,
any information described above on a more frequent basis).

      SECTION 4.4.      COMPLIANCE.  Borrower  shall,  and  shall  cause  each
Subsidiary  thereof to, (a)  preserve  and  maintain  all  licenses,  permits,
governmental  approvals,  rights,  privileges and franchises necessary for the
conduct of its business and (b) comply with the  provisions  of all  documents
pursuant to which it is organized and/or which govern its continued  existence
and with the  requirements of all laws,  rules,  regulations and orders of any
governmental authority applicable to it and/or its business.

      SECTION 4.5.      INSURANCE.   Borrower  shall,  and  shall  cause  each
Subsidiary  thereof to, (a) maintain and keep in force  insurance of the types
and in amounts  customarily  carried in lines of  business  similar to that of
Borrower or such Subsidiary,  as applicable,  including,  without  limitation,
fire,   extended-coverage,   public-liability,   flood,   property-damage  and
workers'-  compensation  insurance,  with  all  such  insurance  carried  with
companies and in amounts  satisfactory  to Bank,  and (b) deliver to Bank from
time to time at Bank's  request  schedules  setting  forth all such  insurance
then in effect.

      SECTION 4.6.      FACILITIES.  Borrower  shall,  and  shall  cause  each
Subsidiary  thereof to, (a) keep all  properties  useful or  necessary  to its
business  in good  repair  and  condition  and  (b)  from  time  to time  make
necessary repairs,  renewals and replacements  thereto so that such properties
shall be fully and efficiently preserved and maintained.

                                      -10-
<PAGE>

      SECTION 4.7.      TAXES  AND  OTHER  LIABILITIES.  Borrower  shall,  and
shall cause each  Subsidiary  thereof to, pay and  discharge  when due any and
all indebtedness,  obligations, assessments and taxes, both real and personal,
including,  without  limitation,  federal and state income taxes and state and
local property taxes and assessments,  except such (a) as Borrower may in good
faith  contest or as to which a bona fide  dispute may arise and (b) for which
Borrower has made  provision,  to Bank's  satisfaction,  for eventual  payment
thereof in the event Borrower is obligated to make such payment.

      SECTION 4.8.      LITIGATION.  Borrower  shall  promptly  give notice in
writing to Bank of any litigation  pending or threatened  against  Borrower or
any  Subsidiary  thereof with a claim in excess of $500,000 (or the equivalent
in one or more currencies).

      SECTION 4.9.      FINANCIAL  CONDITION.   Borrower  shall  maintain  the
consolidated  financial  condition of it and its consolidated  Subsidiaries as
follows,  using generally accepted accounting principles  consistently applied
and used  consistently  with prior practices (except to the extent modified by
the definitions herein):

            (a) Current Ratio not less than 1.10 to 1.00,  tested as of the last
day of each fiscal month  commencing  with March of 2003,  with "Current  Ratio"
being defined as total current assets divided by total current liabilities;

            (b)  Tangible  Net Worth,  tested as of the last day of each  fiscal
month commencing with March of 2003, not less than  $13,500,000,  with "Tangible
Net Worth" being  defined as the  aggregate of total  stockholders'  equity plus
subordinated debt less any intangible assets;

            (c) for each fiscal  quarter of  Borrower,  operating  cash flow (as
defined in accordance with Financial Accounting Standards Board Statement No. 95
("FASB 95")) to be greater than the sum of required  capitalized  lease payments
plus  required  debt  repayments  plus  capital   expenditures  (as  defined  in
accordance  with FASB 95), tested as of the last day of each such fiscal quarter
commencing with the quarter ending September of 2003;

            (d) for  each  fiscal  month of  Borrower,  negative  variance  from
projected  revenues  (based on the monthly and quarterly  projections  which has
been delivered to Bank as an attachment to the officers' certificate pursuant to
Section  3.1(b)(ii))  to be less  than  15%,  tested  as of the last day of each
fiscal month commencing with March of 2003; provided, however, that, if Borrower
fails to comply with the foregoing covenant in respect of any fiscal month, then
such failure  shall not  constitute a default of such covenant  unless  Borrower
fails to comply with such  covenant  when applied to such fiscal month  combined
with the immediately preceding fiscal month; further provided, however, that, if
Borrower  fails to comply with the  foregoing  covenant in respect of any fiscal
month and the immediately  preceding  fiscal month,  then such failure shall not
constitute a default of such covenant  unless Borrower fails to comply with such
covenant  when  applied  to such  fiscal  month  combined  with the  immediately
preceding two fiscal months;

            (e) net operating  income,  tested as of the last day of each fiscal
month  commencing  with September of 2003, not less than $1, with "net operating
income"  being defined as income before  interest  income or expense,  equity in
earnings of any unconsolidated affiliate, currency-exchange gains or losses, any
other income or expenses, taxes and minority interests in affiliates; and

                                      -11-
<PAGE>

            (f) ratio of total  liabilities  to Tangible Net Worth not more than
1.10 to 1.00,  tested as of the last day of each fiscal  month  commencing  with
March of 2003.

      SECTION 4.10.     NOTICES TO BANK.  Borrower  shall  promptly (but in no
event  more than five (5) days  after the  occurrence  of each event or matter
described  below) give written notice to Bank in reasonable  detail of (a) the
occurrence of any Event of Default or any condition,  event or act which, with
the  giving of notice or the  passage  of time or both,  would  constitute  an
Event of Default,  (b) any change in the name or  organizational  structure of
Borrower,  (c) the occurrence and nature of any Reportable Event or Prohibited
Transaction,  each as defined in ERISA, or any funding deficiency with respect
to any Plan,  (d) any  termination  or  cancellation  of any insurance  policy
which  Borrower is required to maintain  and (e) any  uninsured  or  partially
uninsured  loss  through  liability  or property  damage  (including,  without
limitation,   from  fire,  theft  or  any  other  cause  affecting  Borrower's
property) in excess of an aggregate of $500,000 (or the  equivalent  in one or
more currencies).

                                  ARTICLE V
                                  ---------
                              NEGATIVE COVENANTS
                              ------------------

      Borrower  covenants  that,  so long as Bank remains  committed to extend
credit to  Borrower  pursuant  hereto or any  liabilities  (whether  direct or
contingent,  liquidated or  unliquidated) of Borrower to Bank under any of the
Loan  Documents  remain  outstanding,   and  until  payment  in  full  of  all
obligations of Borrower subject hereto,  Borrower shall, unless Bank otherwise
consents in writing, observe all of the negative covenants set forth below.

      SECTION 5.1.      USE OF  FUNDS.  Borrower  shall  not,  and  shall  not
permit  any  Subsidiary  thereof  to,  use any of the  proceeds  of any credit
extended hereunder except for the purposes stated in Article I hereof.

      SECTION 5.2.      CAPITAL  EXPENDITURES.  Borrower  shall not, and shall
not permit  any  Subsidiary  thereof  to,  make any  capital  expenditure  (as
defined  in  accordance  with  FASB  95)  in  excess  of  $2,000,000  (or  the
equivalent  in one or more  currencies)  in the aggregate for Borrower and its
Subsidiaries in any fiscal year.

      SECTION 5.3.      LEASE  EXPENDITURES.  Borrower  shall  not,  and shall
not permit any  Subsidiary  thereof to, incur any  operating  lease expense in
excess of  $1,500,000  (or the  equivalent in one or more  currencies)  in the
aggregate for Borrower and its Subsidiaries in any fiscal year.

      SECTION 5.4.      OTHER  INDEBTEDNESS.  Borrower  shall  not,  and shall
not permit any  Subsidiary  thereof  to,  create,  incur,  assume or permit to
exist any  indebtedness  or  liabilities  resulting  from  borrowings,  loans,
advances,  capitalized leases or purchase-money indebtedness,  whether secured
or unsecured,  matured or  unmatured,  liquidated  or  unliquidated,  joint or
several,  except for (a) liabilities of Borrower to Bank,  (b) liabilities  of
Swiss Sub to UBS AG not exceeding Swiss Francs  5,000,000,  (c) liabilities of
Domilens  to  any  financial   institution  not  exceeding  $500,000  (or  the
equivalent in one or more  currencies),  (d)  purchase-money  indebtedness and
capitalized   leases  of  Borrower  or  any  Subsidiary  thereof  incurred  in
connection  with  the  purchase  or  lease  of  equipment,   so  long  as  the
outstanding  principal amount of indebtedness incurred in connection with such
purchase or lease of equipment,  whether  before or after the date hereof,  at

                                      -12-
<PAGE>

no time exceeds  $1,000,000 (or the  equivalent in one or more  currencies) in
the  aggregate,  (e)  liabilities  permitted by Section 5.7 hereof and (f) any
other  liabilities of Borrower or any Subsidiary  thereof  existing as of, and
disclosed to Bank prior to, the date hereof.

      SECTION 5.5.      MERGER,  CONSOLIDATION,  TRANSFER OF ASSETS.  Borrower
shall not, and shall not permit any  Subsidiary  thereof to, (a) merge into or
consolidate  with any other  entity,  (b) make any  substantial  change in the
nature of its business as conducted as of the date hereof,  (c) acquire all or
substantially  all of the  assets  of any other  entity  or (d)  sell,  lease,
transfer or otherwise  dispose of all or a substantial or material  portion of
its assets, except in the ordinary course of its business.

      SECTION 5.6.      GUARANTIES.  Borrower  shall not, and shall not permit
any  Subsidiary  thereof to,  guarantee or become liable in any way as surety,
endorser  (other  than as endorser of  negotiable  instruments  for deposit or
collection  in the ordinary  course of  business),  accommodation  endorser or
otherwise  for, or pledge or  hypothecate  any assets thereof as security for,
any  liabilities or  obligations of any other person or entity,  except any of
the foregoing in favor of Bank.

      SECTION 5.7.      LOANS,  ADVANCES,  INVESTMENTS.  Borrower  shall  not,
and shall not permit any  Subsidiary  thereof  to,  make any loan,  advance or
other extension of credit (including,  without limitation,  for products sold)
to, or  investment  in, any person or entity,  except for (a) loans,  advances
and other  extensions  of credit by Borrower to its foreign  Subsidiaries  not
exceeding  $8,500,000  (or the  equivalent in one or more  currencies)  in the
aggregate at any time  outstanding,  (b) loans,  advances and other extensions
of  credit  by Swiss  Sub or any  Subsidiary  of Swiss Sub to Swiss Sub or any
other  Subsidiary  of Swiss Sub, (c) loans,  advances and other  extensions of
credit to Borrower by any Subsidiary  thereof and (d)  investments by Borrower
in any Subsidiary  thereof,  and  investments by any Subsidiary of Borrower in
any  Subsidiary  of  such  Subsidiary,  to the  extent  such  investments  are
existing as of, and disclosed to Bank prior to, the date hereof.

      SECTION 5.8.      DIVIDENDS,  DISTRIBUTIONS.  Borrower  shall  not,  and
shall not permit any  Subsidiary  thereof to, (a) declare or pay any  dividend
or  distribution  either in cash,  stock or any other  property or (b) redeem,
retire,  repurchase  or otherwise  acquire any shares of any class of stock of
Borrower or any Subsidiary thereof; provided,  however, that any Subsidiary of
Borrower may pay  dividends to Borrower,  and any  Subsidiary  of Borrower may
pay  dividends to any other  Subsidiary  of Borrower if and to the extent that
such dividends are used to pay dividends to Borrower.

      SECTION 5.9.      PLEDGE OF ASSETS.  Borrower  shall not,  and shall not
permit  any of its  Subsidiaries  to,  mortgage,  pledge or grant or permit to
exist a security  interest in, or lien upon,  all or any portion of Borrower's
or such  Subsidiary's  assets  now  owned or  hereafter  acquired  (including,
without  limitation,  all or any part of the shares of any direct or  indirect
Subsidiary  of  Borrower),  except  any of the  foregoing  in favor of Bank or
which are existing as of, and  disclosed to Bank in writing prior to, the date
hereof.

                                  ARTICLE VI
                                  ----------
                              EVENTS OF DEFAULT
                              -----------------

      SECTION 6.1.      The   occurrence  of  any  of  the   following   shall
constitute an "Event of Default" under this Agreement:

                                      -13-
<PAGE>

            (a) Borrower  fails to pay any principal,  interest,  fee or other
amount when due hereunder or under any other Loan Document;

            (b) any financial  statement or  certificate  furnished to Bank in
connection  with,  or any  representation  or warranty made by Borrower or any
other party  under,  this  Agreement or any other Loan  Document  proves to be
incorrect, false or misleading in any material respect when furnished or made;

            (c) Borrower  defaults in the  performance  of or compliance  with
any obligation,  agreement or other provision contained herein or in any other
Loan Document (other than those referred to in subsections (a) and (b) above);

            (d)  Borrower  defaults  in  the  payment  or  performance  of any
obligation,  or any defined  event of default  occurs,  under the terms of any
contract  or  instrument  (other than any of the Loan  Documents)  pursuant to
which  Borrower  has  incurred  any debt or other  liability  to any person or
entity, including, without limitation, Bank;

            (e) a notice  of  judgment  lien is  filed  against  Borrower;  an
abstract  of  judgment  is  recorded  against  Borrower in any county in which
Borrower has an interest in real  property;  a notice of levy and/or of a writ
of  attachment  or execution,  or other like  process,  is served  against the
assets of Borrower; or a judgment is entered against Borrower;

            (f)  Borrower  becomes  insolvent,  suffers  or  consents  to,  or
applies for the appointment of, a receiver,  trustee,  custodian or liquidator
for itself or any of its  property,  generally  fails to pay its debts as they
become  due or  makes a  general  assignment  for the  benefit  of  creditors;
Borrower files a voluntary petition in bankruptcy,  or seeking reorganization,
in order to effect a plan or other  arrangement  with  creditors  or any other
relief under the  Bankruptcy  Reform Act,  Title 11 of the United States Code,
as amended or recodified from time to time (the "Bankruptcy  Code"),  or under
any other state or federal  law  granting  relief to  debtors,  whether now or
hereafter in effect;  any involuntary  petition or proceeding  pursuant to the
Bankruptcy  Code or any other  applicable  state or federal  law  relating  to
bankruptcy,  reorganization  or other relief for debtors is filed or commenced
against  Borrower,  or Borrower files an answer  admitting the jurisdiction of
the court and the material allegations of any involuntary  petition;  Borrower
is adjudicated a bankrupt;  or an order for relief is entered against Borrower
by any court of competent  jurisdiction under the Bankruptcy Code or any other
applicable  state or federal law  relating to  bankruptcy,  reorganization  or
other relief for debtors;

            (g) any  event  occurs  or  condition  exists  which  Bank in good
faith believes impairs, or is substantially  likely to impair, the prospect of
payment or  performance by Borrower of its  obligations  under any of the Loan
Documents; or

            (h)  Borrower is dissolved  or  liquidated;  or Borrower or any of
its  directors,  stockholders  or members  takes action  seeking to effect the
dissolution or liquidation of Borrower.

      SECTION 6.2.      REMEDIES.   Upon  the   occurrence  of  any  Event  of
Default:  (a) all  indebtedness  of Borrower under each of the Loan Documents,
any term thereof to the contrary  notwithstanding,  shall at Bank's option and
without  notice  become  immediately  due  and  payable  without  presentment,
demand,  protest  or notice of  dishonor,  all of which are  hereby  expressly
waived by Borrower;  (b) the obligation, if any, of Bank to extend any further
credit under any of the Loan Documents shall  immediately cease and terminate;

                                      -14-
<PAGE>

and (c) Bank shall have all rights,  powers and remedies  available under each
of the Loan Documents, or accorded by law, including,  without limitation, the
right to resort to any or all  security for any credit  subject  hereto and to
exercise any or all of the rights of a beneficiary  or secured party  pursuant
to  applicable  law. All rights,  powers and remedies of Bank may be exercised
at any time by Bank and from time to time after the  occurrence of an Event of
Default,  are cumulative  and not  exclusive,  and shall be in addition to any
other rights, powers or remedies provided by law or equity.

                                 ARTICLE VII
                                 -----------
                                MISCELLANEOUS
                                -------------

      SECTION 7.1.      NO  WAIVER.  No delay,  failure or  discontinuance  of
Bank in exercising any right,  power or remedy under any of the Loan Documents
shall affect or operate as a waiver of such right,  power or remedy; nor shall
any single or partial  exercise of any such right,  power or remedy  preclude,
waive or  otherwise  affect  any  other or  further  exercise  thereof  or the
exercise  of any  other  right,  power  or  remedy.  Any  waiver,  consent  or
approval  of any kind by Bank of any  breach  of or  default  under any of the
Loan  Documents  must be in writing and shall be effective  only to the extent
set forth in such writing.

      SECTION 7.2.      NOTICES.  All notices,  requests and demands which any
party  is  required  or may  desire  to  give to any  other  party  under  any
provision of this Agreement must be in writing  delivered to each party at the
following address:

                 Borrower:    Staar Surgical Company
                              1911 Walker Avenue
                              Monrovia, California 91016
                              Attention:  Chief Financial Officer

                 Bank:        Wells Fargo Bank, National Association
                              333 South Grand Avenue, 9th Floor
                              MAC E2064-096
                              Los Angeles, California 90071
                              Attention:  Edith R. Lim

or to such other  address as either party may  designate by written  notice to
the other party.  Each such  notice,  request and demand shall be deemed given
or made as follows: (a) if sent by hand delivery,  upon delivery;  (b) if sent
by mail,  upon the  earlier  of the date of  receipt  or three (3) days  after
deposit into the U.S. mail,  first-class  postage prepaid;  and (c) if sent by
telecopy, upon receipt.

      SECTION 7.3.      COSTS,  EXPENSES AND ATTORNEYS'  FEES.  Borrower shall
pay to  Bank  immediately  upon  demand  the  full  amount  of  all  payments,
advances,  charges,  costs  and  expenses,   including,   without  limitation,
reasonable  attorneys' fees (to include,  without limitation,  outside counsel
fees  and all  allocated  costs  of  Bank's  in-house  counsel),  expended  or
incurred by Bank in connection  with (a) the  negotiation  and  preparation of
this Agreement and the other Loan Documents,  Bank's continued  administration
hereof and thereof,  and the  preparation of any amendments and waivers hereto
and thereto,  (b) the  enforcement  of Bank's rights and/or the  collection of
any  amounts  which  become due to Bank under any of the Loan  Documents,  and
(c) the  prosecution or defense of any action in any way related to any of the
Loan  Documents,  including  without  limitation,  any action for  declaratory

                                      -15-
<PAGE>

relief,  whether  incurred at the trial or appellate  level, in an arbitration
proceeding  or  otherwise,  and  including,  without  limitation,  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 Borrower or any other person
or entity.

      SECTION 7.4.      INDEMNITY.  Borrower  agrees  to  indemnify  and  hold
harmless  Bank and its  directors,  officers,  employees,  agents and advisors
(each of the  foregoing an  "Indemnified  Party") from and against any and all
claims,  demands,  actions,  damages  (including,   without  limitation,   all
foreseeable and unforeseeable  consequential  damages),  losses,  assessments,
liabilities,  costs and expenses  (including,  without limitation,  reasonable
fees and  expenses of counsel)  that may be incurred by or asserted or awarded
against any  Indemnified  Party,  in each case arising out of or in connection
with or by reason of, or in connection  with the preparation for a defense of,
any  investigation,  litigation or proceeding arising out of, related to or in
connection  with (a) the actual or proposed use of the proceeds of any advance
hereunder,  any of the Loan Documents or any of the transactions  contemplated
by any of the Loan  Documents,  (b) the  actual  or  alleged  presence  of any
hazardous  material  in, on or under (i) any  property  owned or  operated  by
Borrower or any Subsidiary  thereof,  (ii) any property to which any hazardous
material has migrated  from any property  owned or operated by Borrower or any
Subsidiary  thereof or (iii) any property at which  Borrower or any Subsidiary
thereof has disposed of any  hazardous  material  (whether or not legal at the
time of such  disposal) or (c) any  environmental  proceeding  relating in any
way to Borrower or any  Subsidiary  thereof,  in any case  whether or not such
investigation,   litigation  or   proceeding  is  brought  by  Borrower,   any
Subsidiary  thereof,  any  of  their  respective  directors,  shareholders  or
creditors or an Indemnified  Party,  whether or not any  Indemnified  Party is
otherwise a party  thereto and  whether or not the  transactions  contemplated
hereby are consummated;  provided,  however, that Borrower shall not be liable
to the extent that any such claim, demand,  action,  damage, loss, assessment,
liability  or expense is found in a final,  nonappealable  judgment by a court
of competent  jurisdiction  to have  resulted  from such  Indemnified  Party's
gross negligence or willful misconduct.

      SECTION 7.5.      SUCCESSORS,   ASSIGNMENT.   This  Agreement  shall  be
binding   upon,   and  inure  to  the  benefit   of,  the  heirs,   executors,
administrators, legal representatives,  successors and assigns of the parties;
provided,  however,  that  Borrower  may not assign or transfer  its  interest
hereunder  without  Bank's prior written  consent.  Bank reserves the right to
sell, assign,  transfer,  negotiate or grant participations in all or any part
of, or any interest  in,  Bank's  rights and  benefits  under each of the Loan
Documents.  In  connection  therewith,  Bank may  disclose all  documents  and
information  which  Bank  now has or may  hereafter  acquire  relating  to any
credit subject hereto,  Borrower or its business,  or any collateral  required
hereunder.

      SECTION 7.6.      ENTIRE  AGREEMENT;  AMENDMENT.  This Agreement and the
other Loan Documents  constitute  the entire  agreement  between  Borrower and
Bank with  respect  to each  credit  subject  hereto and  supersede  all prior
negotiations,  communications,  discussions and correspondence  concerning the
subject  matter hereof.  This  Agreement may be amended or otherwise  modified
only in a  writing  signed  by each  party to be bound  by such  amendment  or
modification.

      SECTION 7.7.      NO THIRD-PARTY  BENEFICIARIES.  This Agreement is made
and entered  into for the sole  protection  and benefit of the parties  hereto
and their respective  permitted successors and assigns, and no other person or

                                      -16-
<PAGE>

entity shall be a third-party  beneficiary  of, or have any direct or indirect
cause of action or claim in connection  with,  this  Agreement or any other of
the Loan Documents to which it is not a party.

      SECTION 7.8.      TIME.  Time  is of  the  essence  of  each  and  every
provision of this Agreement and each other of the Loan Documents.

      SECTION 7.9.      SEVERABILITY  OF PROVISIONS.  If any provision of this
Agreement  shall be  prohibited  by or  invalid  under  applicable  law,  such
provision  shall be  ineffective  only to the  extent of such  prohibition  or
invalidity  without  invalidating  the  remainder  of  such  provision  or any
remaining provisions of this Agreement.

      SECTION 7.10.     COUNTERPARTS.  This  Agreement  may be executed in any
number of  counterparts,  each of which when executed and  delivered  shall be
deemed  to be  an  original  and  all  of  which  when  taken  together  shall
constitute one and the same Agreement.

      SECTION 7.11.     GOVERNING  LAW. This  Agreement  shall be governed by,
and construed in accordance with, the laws of the State of California.

      SECTION 7.12.     RELEASE OF CLAIMS.  Borrower  represents  and warrants
to Bank that it has diligently and  thoroughly  investigated  the existence of
any Claim (as defined  below) and that, to its knowledge and belief,  no Claim
exists and no facts  exist  that  could  give rise to or  support a Claim.  As
additional  consideration  for Bank's entering into this  Agreement,  Borrower
and  each  of  its  agents,   employees,   directors,   officers,   attorneys,
affiliates,  subsidiaries,  successors and assigns (each a "Releasing  Party")
hereby release and forever  discharge Bank and each of its agents,  direct and
indirect shareholders,  employees,  directors,  officers, attorneys, branches,
affiliates,  subsidiaries,  successors  and assigns (each a "Released  Party")
from any and all damages, losses, claims, demands,  liabilities,  obligations,
actions  and  causes of action  whatsoever  (collectively  "Claims")  that the
Releasing  Parties  or any of  them  may,  as of the  effective  date  of this
Agreement,  have or claim to have against any or all of the Released  Parties,
in each case whether  currently  known or unknown or with respect to which the
facts are currently  known or unknown,  in any way relating to, arising out of
or based upon any Loan  Document  (including,  without  limitation,  the Prior
Credit  Agreement),  any amendment,  waiver or other modification with respect
thereto,  the  negotiation  or  documentation  hereof or  thereof,  any of the
transactions  contemplated  hereby  or  thereby,  or any  act or  omission  in
connection with any of the foregoing,  including, without limitation, all such
Claims  heretofore  sustained  or  that  may  arise  as a  consequence  of the
dealings  between the parties up to the  effective  date of this  Agreement in
connection  with or in any way related to any Loan Document or any  amendment,
waiver or other  modification  with  respect  thereto.  Each  Releasing  Party
further  represents  and warrants  that it has not  heretofore  assigned,  and
covenants and agrees that it will not  hereafter sue any Released  Party upon,
any Claim  released or  purported  to be  released  under this  section.  Each
Releasing Party will indemnify and hold harmless the Released  Parties against
any loss or  liability  on account  of any  actions  brought by any  Releasing
Party or its  assigns  or  prosecuted  on  behalf of any  Releasing  Party and
relating  to any  Claim  released  or  purported  to be  released  under  this
section.  It is further  understood  and agreed that any and all rights  under
the  provisions  of Section 1542 of the  California  Civil Code are  expressly
waived  by each  of the  Releasing  Parties.  Section  1542 of the  California
Civil Code provides as follows:

      "A general  release  does not extend to claims  which the creditor
      does not  know or  suspect  to  exist in his  favor at the time of
      executing the release,  which if known by him must have materially
      affected his settlement with the debtor."

                                      -17-
<PAGE>

Borrower  acknowledges  that it has had the opportunity to be advised by legal
counsel  in  respect  of the  negotiation,  execution  and  delivery  of  this
Agreement, including, without limitation, this release of claims.

      SECTION 7.13.     ARBITRATION.

            (a)  Arbitration.   The  parties  hereto  agree,  upon  demand  by
either  party,  to submit to binding  arbitration  all  claims,  disputes  and
controversies  between  them  (and  their  respective   employees,   officers,
directors,  attorneys and other agents),  whether arising in tort, contract or
otherwise  arising out of or relating to in any way (i) any advance under this
Agreement,    any   Loan    Document    or   the    negotiation,    execution,
collateralization,   administration,   repayment,   modification,   extension,
substitution,  formation,  inducement,  enforcement, default or termination of
any Loan Document or (ii) any request for additional credit.

            (b)  Governing   Rules.   Any  arbitration   proceeding  will  (i)
proceed at a location  in  California  selected  by the  American  Arbitration
Association  (the  "AAA");  (ii) be governed by the  Federal  Arbitration  Act
(Title  9  of  the  United  States  Code),   notwithstanding  any  conflicting
choice-of-law  provision  in any of the  documents  between the  parties;  and
(iii) be  conducted  by the AAA,  or such other  administrator  as the parties
shall mutually  agree upon, in accordance  with the AAA's  commercial  dispute
resolution   procedures,   unless  the  claim  or  counterclaim  is  at  least
$1,000,000 (or the equivalent in one or more currencies)  exclusive of claimed
interest,  arbitration fees and costs, in which case the arbitration  shall be
conducted in accordance with the AAA's optional procedures for large,  complex
commercial  disputes  (the  commercial  dispute  resolution  procedures or the
optional procedures for large,  complex commercial disputes to be referred to,
as  applicable,  as the "Rules").  If there is any  inconsistency  between the
terms hereof and the Rules,  the terms and  procedures  set forth herein shall
control.  Any party that fails or refuses to submit to  arbitration  following
a demand by any other  party  shall bear all costs and  expenses  incurred  by
such other party in compelling  arbitration of any dispute.  Nothing contained
herein  shall be  deemed  to be a waiver  by any  party  that is a bank of the
protections  afforded to it under 12 U.S.C. Section 91 or any similar applicable
state law.

            (c)  No   Waiver  of   Provisional   Remedies,   Self-Help   and
Foreclosure.  The  arbitration  requirement  does not  limit  the right of any
party to (i)  foreclose  against real or personal  property  collateral;  (ii)
exercise  self-help  remedies relating to collateral or proceeds of collateral
such as setoff or  repossession;  or (iii)  obtain  provisional  or  ancillary
remedies such as replevin,  injunctive  relief,  attachment or the appointment
of a  receiver,  before  during  or  after  the  pendency  of any  arbitration
proceeding.  This  exclusion  does not  constitute  a waiver  of the  right or
obligation  of any party to submit any  dispute to  arbitration  or  reference
hereunder,  including,  without limitation. those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

            (d)  Arbitrator   Qualifications   and  Powers.   Any  arbitration
proceeding  in  which  the  amount  in   controversy  is  $5,000,000  (or  the
equivalent  in one or more  currencies)  or less will be  decided  by a single
arbitrator  selected  according  to the  Rules,  who shall not render an award
greater than  $5,000,000  (or the equivalent in one or more  currencies).  Any
dispute  in  which  the  amount  in  controversy  exceeds  $5,000,000  (or the
equivalent  in one or more  currencies)  will be decided by majority vote of a
panel of three  arbitrators;  provided,  however,  that all three  arbitrators
must actively  participate in all hearings and  deliberations.  The arbitrator
will be a neutral  attorney  licensed in the State of  California or a neutral
retired judge of the state or federal judiciary of California,  in either case

                                      -18-
<PAGE>

with a minimum of ten years  experience in the  substantive  law applicable to
the  subject  matter of the  dispute to be  arbitrated.  The  arbitrator  will
determine  whether or not an issue is arbitratable and will give effect to the
statutes  of  limitation  in  determining   any  claim.   In  any  arbitration
proceeding the arbitrator  will decide (by documents only or with a hearing at
the  arbitrator's  discretion)  any  pre-hearing  motions which are similar to
motions  to  dismiss  for  failure  to state a claim or  motions  for  summary
adjudication.  The  arbitrator  shall resolve all disputes in accordance  with
the  substantive  law of California  and may grant any remedy or relief that a
court of such state  could  order or grant  within  the scope  hereof and such
ancillary  relief as is necessary to make effective any award.  The arbitrator
shall also have the power to award  recovery of all costs and fees,  to impose
sanctions and to take such other action as the arbitrator  deems  necessary to
the  same  extent  a judge  could  pursuant  to the  Federal  Rules  of  Civil
Procedure,  the California  Rules of Civil Procedure or other  applicable law.
Judgment  upon the award  rendered  by the  arbitrator  may be  entered in any
court having  jurisdiction.  The  institution and maintenance of an action for
judicial  relief or pursuit of a  provisional  or  ancillary  remedy shall not
constitute a waiver of the right of any party, including,  without limitation,
the plaintiff,  to submit the controversy or claim to arbitration if any other
party contests such action for judicial relief.

            (e) Discovery.  In any  arbitration  proceeding  discovery will be
permitted  in  accordance  with the Rules.  All  discovery  shall be expressly
limited to matters directly  relevant to the dispute being arbitrated and must
be  completed  not later than 20 days before the  hearing  date and within 180
days  of the  filing  of  the  dispute  with  the  AAA.  Any  requests  for an
extension  of the  discovery  periods,  or any  discovery  disputes,  will  be
subject  to final  determination  by the  arbitrator  upon a showing  that the
request for  discovery is essential for the party's  presentation  and that no
alternative means for obtaining information is available.

            (f) Class  Proceedings and  Consolidations.  The resolution of any
dispute  arising  pursuant to the terms of this Agreement  shall be determined
by  a  separate  arbitration  proceeding,   and  such  dispute  shall  not  be
consolidated with other disputes or included in any class proceeding.

            (g) Payment of Arbitration  Costs and Fees.  The arbitrator  shall
award all costs and expenses of the arbitration proceeding.

            (h)    Real    Property     Collateral;     Judicial    Reference.
Notwithstanding   anything  herein  to  the  contrary,  no  dispute  shall  be
submitted  to  arbitration  if  the  dispute  concerns   indebtedness  secured
directly or indirectly,  in whole or in part, by any real property  unless (i)
the holder of the mortgage,  lien or security interest  specifically elects in
writing  to  proceed  with  the  arbitration,  or  (ii)  all  parties  to  the
arbitration  waive any rights or benefits  that might accrue to them by virtue
of  the   single-action   rule  of  California,   thereby  agreeing  that  all
indebtedness  and  obligations of the parties,  and all  mortgages,  liens and
security  interests  securing such indebtedness and obligations,  shall remain
fully  valid  and  enforceable.  If  any  such  dispute  is not  submitted  to
arbitration,  the dispute  shall be referred to a referee in  accordance  with
California  Code of Civil  Procedure  Section  638 et seq.,  and this  general
reference  agreement is intended to be specifically  enforceable in accordance
with said Section 638. A referee with the  qualifications  required herein for
arbitrators  shall be  selected  pursuant to the AAA's  selection  procedures.
Judgment  upon the  decision  rendered  by a referee  shall be  entered in the
court in which such  proceeding  was commenced in accordance  with  California
Code of Civil Procedure Sections 644 and 645.

            (i)  Miscellaneous.  To the maximum extent  practicable,  the AAA,
the  arbitrators  and the parties  shall take all action  required to conclude

                                      -19-
<PAGE>

any arbitration  proceeding  within 180 days of the filing of the dispute with
the AAA.  No  arbitrator  or  other  party to an  arbitration  proceeding  may
disclose the existence,  content or results thereof, except for disclosures of
information by a party  required in the ordinary  course of its business or by
applicable  law or regulation.  If more than one agreement for  arbitration by
or between  the  parties  potentially  applies to a dispute,  the  arbitration
provision  most directly  related to the Loan  Documents or the subject matter
of the  dispute  shall  control.  This  arbitration  provision  shall  survive
termination,  amendment  or  expiration  of any of the Loan  Documents  or any
relationship between the parties.

      SECTION 7.14.       WAIVERS.  As of the  Effective  Date but  subject to
satisfaction of the terms and conditions  specified herein, Bank hereby waives
the  Events  of  Default  caused  by  Borrower's  violation  of the  covenants
contained  in Section  4.9(e) of the Prior  Credit  Agreement  with respect to
February  of 2003  and in  Section  5.3 of the  Prior  Credit  Agreement  with
respect  to the 2002  fiscal  year.  Except  for the  foregoing  waivers,  the
execution,  delivery and  effectiveness of this Agreement shall not operate as
a  waiver  of any  right,  power  or  remedy  of Bank  under  any of the  Loan
Documents  or  constitute  a  waiver  of any  provision  of  any  of the  Loan
Documents.


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                                      -20-
<PAGE>


            IN WITNESS WHEREOF,  the parties hereto have caused this Agreement
to be executed as of the day and year first written above.


                                    STAAR SURGICAL COMPANY


                                    By:
                                        -----------------------
                                    Name:
                                          ---------------------
                                    Title:
                                           --------------------



                                    WELLS FARGO BANK, NATIONAL ASSOCIATION


                                    By:
                                        -----------------------
                                    Name:   Edith R. Lim
                                    Title:  Vice President















