EXHIBIT 10.1

[LETTER HEAD OF WELLS FARGO BANK]

October 25, 2002

Staar Surgical Company
1911 Walker Avenue
Monrovia, California 91016

Attention:

John Bily

 

Chief Financial Officer

 

             Re:

Second Amendment to Amended and Restated Credit Agreement

Ladies and Gentlemen:

          We refer to the 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 (said Agreement, as so amended, herein called the
“Credit Agreement”) between Staar Surgical Company, a Delaware corporation (the
“Borrower”), and Wells Fargo Bank, National Association, a national banking
association (the “Bank”).  Terms defined in the Credit Agreement and not
otherwise defined herein have the same meanings when used herein.

          1.     Amendments to Credit Agreement.  As of the effective date of
this letter amendment but subject to satisfaction of the terms and conditions
specified herein, the Credit Agreement is hereby amended as set forth below.

                  The table set forth in Section 1.2(c) of the Credit Agreement
is amended in full to read as follows:

Level

 

Funded Debt to EBITDA Ratio

 

Applicable Interest Margin

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(Effective October 1, 2002)

1

 

>0.00:1.00 but <2.00:1.00

 

1.00% per annum

2

 

>2.00:1.00 but <4.00:1.00

 

2.00% per annum

3

 

>4.00:1.00 but <6.00:1.00

 

3.00% per annum

4

 

>6.00:1.00 or <0.00:1.00

 

5.00% per annum

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Staar Surgical Company
October 25, 2002
Page 2

               The table set forth in Section 1.2(f) of the Credit Agreement is
amended in full to read as follows:

Level

 

Funded Debt to EBITDA Ratio

 

Applicable Fee Rate

--------------------------------------------------------------------------------

 

--------------------------------------------------------------------------------

 

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(Effective October 1, 2002)

1

 

>0.00:1.00 but <2.00:1.00

 

0.25% per annum

2

 

>2.00:1.00 but <4.00:1.00

 

0.50% per annum

3

 

>4.00:1.00 but <6.00:1.00

 

0.75% per annum

4

 

>6.00:1.00 or <0.00:1.00

 

1.25% per annum

               Section 4.3 of the Credit Agreement is further amended by
deleting the word “and” immediately after the semicolon in subsection (i), by
re-lettering subsection (j) as subsection (k) and by inserting a new subsection
(j) to read as follows:

 

               “(j)  not later than November 29, 2002, receipt of fiscal year
2003 projections; and.”

               Section 4.9 of the Credit Agreement is amended by restating
subsections (b) and (e) in full to read as follows:

 

               “(b)  Tangible Net Worth, tested as of the last day of each
fiscal month commencing with August of 2002, not less than $26,500,000 for
August of 2002 and not less than $24,000,000 thereafter, with ‘Tangible Net
Worth’ being defined as the aggregate of total stockholders’ equity plus
subordinated debt less any intangible assets;

 

 

 

                “(e)  net operating loss not more than: (i) $750,000 for October
of 2002, (ii) $400,000 for November of 2002 and (iii) net operating income not
less than $1 thereafter, with ‘net operating income or loss’ being defined as
income or loss 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;”

               (e)       Schedule 3 to the Credit Agreement is amended in full
to be in the form attached hereto as Schedule 3.

          2.     Waiver of Events of Default under Credit Agreement.  As of the
effective date of this letter amendment but subject to satisfaction of the terms
and conditions specified herein, the Bank

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Staar Surgical Company
October 25, 2002
Page 3

hereby waives the Events of Default caused by the Borrower’s violation of the
covenant contained in Section 4.9(e) of the Credit Agreement with respect to
August and September of 2002.

          3.     Representations and Warranties.  The Borrower hereby represents
and warrants for the benefit of the Bank that (a) the representations and
warranties of the Borrower contained in the Loan Documents are correct in all
material respects on and as of the effective date of this letter amendment,
before and after giving effect to the same, as if made on and as of such date,
and (b) no event has occurred and is continuing, or would result from the
effectiveness of this letter amendment, that constitutes an Event of Default.

          4.     Conditions Precedent.  This letter amendment shall become
effective as of the date first set forth above, when and if (a) the Borrower and
the Bank execute counterparts of this letter amendment and deliver them to each
other, and (b) the Bank receives from the Borrower an amendment fee in the
amount of $10,750 (i.e., 0.25% of $4,300,000).

          5.     Release of Claims.  The Borrower represents and warrants to the
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 the Bank’s entering into this letter amendment, the Borrower
and each of its agents, employees, directors, officers, attorneys, affiliates,
subsidiaries, successors and assigns (each a “Releasing Party”) hereby release
and forever discharge the 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 letter amendment, 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 known (or should have
been known), that could give rise to or support a Claim on account of or in any
way relating to, arising out of or based upon any Loan Document, 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 action or omission in connection with any of the foregoing,
including all such damages, losses, claims, demands, liabilities, obligations,
actions and causes of action heretofore sustained or that may arise as a
consequence of the dealings between the parties up to the effective date of this
letter amendment 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:

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Staar Surgical Company
October 25, 2002
Page 4

“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.”

          7.     Reference to and Effect on Loan Documents.  On and after the
effective date of this letter amendment, (a) each reference in the Credit
Agreement to “this Agreement,” “hereunder,” “hereof,” “herein” or words of like
import referring to the Credit Agreement, and each reference in the other Loan
Documents to “the Credit Agreement,” “thereunder,” “thereof,” “therein” or words
of like import referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement as amended by this letter amendment, and (b) each
reference in the other Loan Documents to “the Line of Credit Note,”
“thereunder,” “thereof,” “therein” or words of like import referring to the Line
of Credit Note shall mean and be a reference to the new Line of Credit Note
executed by the Borrower in connection with this letter amendment.  The Credit
Agreement, as amended by this letter amendment, is and shall continue to be in
full force and effect and is hereby ratified and confirmed in all respects.

          8.     Execution in Counterparts.  This letter amendment may be
executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same letter amendment.

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Staar Surgical Company
October 25, 2002
Page 5

          9.     GOVERNING LAW.  THIS LETTER AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REFERENCE TO THE CHOICE-OF-LAW PRINCIPLES THEREOF.

 

 

Very truly yours,

 

 

 

 

WELLS FARGO BANK,
NATIONAL ASSOCIATION

 

 

 

 

By:

 

 

 

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Name:

 

 

 

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Title:

 

 

 

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Agreed as of the date first written above:

 

STAAR SURGICAL COMPANY

 

By:

 

 

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Name:

 

 

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Title:

 

 

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Staar Surgical Company
October 25, 2002
Page 6

SCHEDULE 3
TO AMENDED AND RESTATED CREDIT AGREEMENT

MANDATORY REDUCTION OF LINE OF CREDIT

Date

 

 

Amount of Reduction

 

 

Line of Credit

 

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August 7, 2002

 

$

2,500,000

 

$

4,500,000

 

August 30, 2002

 

$

100,000

 

$

4,400,000

 

September 30, 2002

 

$

100,000

 

$

4,300,000

 

October 31, 2002

 

$

125,000

 

$

4,175,000

 

November 29, 2002

 

$

150,000

 

$

4,025,000

 

December 31, 2002

 

$

320,000

 

$

3,705,000

 

January 31, 2003

 

$

345,000

 

$

3,360,000

 

February 28, 2003

 

$

360,000

 

$

3,000,000

 

March 31, 2003

 

$

3,000,000

 

$

0