Exhibit 10.3

                                    AMENDMENT
                                       TO
                                 LOAN AGREEMENT

         This Amendment to Loan Agreement is entered into as of February 5, 1999
(the  "Amendment")  by and between  SILICON  VALLEY BANK  ("Agent") as Servicing
Agent  and a Bank and BANK OF  HAWAII  ("BofH";  SVB and  BofH are  referred  to
individually  herein as "Bank",  and  collectively  as the "Banks") and CREDENCE
SYSTEMS  CORPORATION,  a Delaware  corporation  ("Credence"),  Credence Korea, a
Korean   corporation,   and  Credence  Systems  K.K.,  a  Japanese   corporation
(individually a "Borrower" and collectively, the "Borrowers").

                                    RECITALS

         Borrower and Bank are parties to that certain Loan  Agreement  dated as
of July 26, 1996, and amended by that certain  Amendment to Loan Agreement dated
as of July 25, 1997 and that  certain  Amendment to Loan  Agreement  dated as of
July 24, 1998 (the  "Agreement").  The parties  desire to amend the Agreement in
accordance with the terms of this Amendment.

         NOW, THEREFORE, the parties agree as follows:

         1. The following definitions in Section 1.1 are amended and replaced in
         their entirety to read as follows:

                  "Total  Liabilities"  means at any date as of which the amount
thereof shall be determined,  all  obligations  that should,  in accordance with
GAAP  be  classified  as  liabilities  on  the  consolidated  balance  sheet  of
Borrowers, including in any event all Indebtedness.

                  "Tangible Net Worth" means, at any date as of which the amount
thereof shall be determined,  the consolidated  total assets of Borrowers minus,
without  duplication,  (i) the sum of any amounts  attributable to (a) goodwill,
(b)  intangible  items such as unamortized  debt discount and expense,  patents,
trade and service  marks and names,  copyrights  and  research  and  development
expenses except prepaid expenses, and (c) all reserves not already deducted from
assets, and (ii) Total Liabilities."

     2. The  references in Sections  2.1(c) and 2.1(d) to "150 basis points" are
hereby amended to read "200 basis points".

     3. Section 5.8 is hereby  deleted in its  entirety  and  replaced  with the
following:

     "5.8 Debt-Tangible Net Worth Ratio.  Maintain,  on a consolidated basis, as
of the last day of each fiscal quarter, a ratio of Total Liabilities,  excluding
Subordinated Debt, to Tangible Net Worth, of not more tha 1.0 to 1.0."

     4. Section 5.9 is hereby  deleted in its  entirety  and  replaced  with the
following:

     "5.9 Tangible Net Worth.  Maintain, on a consolidated basis, as of the last
day of each fiscal quarter,  a Tangible Net Worth plus  Subordinated Debt of not
less than Two Hundred Twenty Million Dollars ($220,000,000)."

     5.  Section 5.10 is hereby  deleted in its  entirety and replaced  with the
following:

     "5. 10  Profitability.  On a consolidated  basis,  sustain from  continuous
operations  excluding  noncash events,  a loss of no more than Thirteen  Million
Dollars  ($13,000,000)  for each of the fiscal quarters ending on April 30, 1999
and July 31,  1999,  provided  that  Borrower  may not sustain  from  continuous
operations, excluding noncash events, a loss of more than Twenty Million Dollars
($20,000,000)  in the  aggregate for both quarters  combined.  Thereafter,  on a
consolidated basis, have a minimum continuous  operations net profit of at least
One Dollar ($1.00) for each fiscal year."

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<PAGE>

     6. Bank waives Borrower's  obligations to comply with Section 5.10 for both
the quarter and the year  ending on October 31,  1998.  Bank does not waive such
obligations  for any other dates or any other failure by Borrower to perform its
obligations  under the Loan  Documents.  This waiver is not a continuing  waiver
with  respect to any  failure to perform any  obligation  after the date of this
Amendment.

     7. On the signature  page of the Agreement the reference to Silicon  Valley
Bank's Maximum Commitment Amount:  $15,000,000 (37.5%) is hereby amended to read
$20,000,000 (50.0%).

     8. On the signature page of the Agreement the reference to Bank of Hawaii's
Maximum  Commitment  Amount:  $25,000,000  (62.5%)  is  hereby  amended  to read
$20,000,000 (50.0%).

     9. The  attached  Exhibit C is hereby added and  incorporated  by reference
into the Agreement.

     10. As a condition  to the  effectiveness  of this  Amendment,  Banks shall
receive a fee of Twenty-Five  Thousand Dollars ($25,000),  payable upon the date
hereof,  plus all Bank Expenses  incurred in connection  with the preparation of
this Amendment.

     11. As a condition to the effectiveness of this Amendment,  Bank shall have
received, in form and substance satisfactory to Bank, the following:

          (a)  resolutions  by  the  Borrowers  authorizing  the  execution  and
     delivery of this Amendment; and

          (b) such other  documents,  and completion of such other  matters,  as
     Bank may reasonably deem necessary or appropriate.

     12. Unless otherwise defined, all capitalized terms in this Amendment shall
be as defined in the Agreement. Except as amended, the Agreement remains in full
force and effect.

     13.  Borrower   represents  and  warrants  that  the   Representations  and
Warranties  contained  in the  Agreement  are true and correct as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.

     14. This Amendment may be executed in two or more counterparts, each of
which shall be deemed an original,  but all of which together  shall  constitute
one instrument.

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<PAGE>

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

       CREDENCE SYSTEMS CORPORATION

       By:        /s/  JERRY BRUCE
       Title:     V.P., TREASURER & CONTROLLER

       CREDENCE KOREA

       By:        /s/  DENNIS WOLF
       Title:    DIRECTOR

       CREDENCE SYSTEMS K.K.

       By:        /s/  CLYDE ARMSTRONG
       Title:    DIRECTOR

        SILICON VALLEY BANK

       By:        /s/  DIANNE THOMPSON
       Title:      SVP

       BANK OF HAWAII

       By:        /s/  DAVID L. WARD, IV
       Title:     ASSISTANT VICE PRESIDENT


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<PAGE>


                                    EXHIBIT C
                             COMPLIANCE CERTIFICATE

TO:               SILICON VALLEY BANK
                  BANK OF HAWAII

FROM:             CREDENCE SYSTEMS CORPORATION

         The  undersigned  authorized  officer of CREDENCE  SYSTEMS  CORPORATION
hereby  certifies  that in accordance  with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete  compliance  for the period  ending with all  required  covenants
except as noted below and (ii) all  representations  and  warranties of Borrower
stated in the Agreement are true and correct in all material  respects as of the
date hereof.  Attached herewith are the required documents  supporting the above
certification.  The  Officer  further  certifies  that  these  are  prepared  in
accordance  with  Generally  Accepted  Accounting   Principles  (GAAP)  and  are
consistently  applied  from one  period to the next  except as  explained  in an
accompanying letter or footnotes.

  Please indicate compliance status by circling Yes/No under "Complies" column.
<TABLE>
<CAPTION>

          Reporting Covenant                              Required                                      Complies
          <S>                                             <C>                                           <C>          <C>

          Form 10-K                                       Annually within 5 days                        Yes          No
          Form 10-Q                                       Quarterly within 5 days                       Yes          No
          A/R & A/P Agings                                Monthly within 20 days if                     Yes          No
                                                          outstanding Advances exceed
                                                          $20,000,000
</TABLE>
<TABLE>
<CAPTION>

          Financial Covenant                              Required                      Actual Complies
          <S>                                             <C>                           <C>             <C>          <C>

          Maintain on a Quarterly Basis:
            Minimum Quick Ratio                           2.0:1.0                              :1.0     Yes          No
            Tangible Net Worth                            $220,000,000                  $       -       Yes          No
            Debt/ Tangible Net Worth                      1.0:1.0                              :1.0     Yes          No
            Profitability                                 1                             $       -       Yes          No
</TABLE>

1 .  Borrower  shall not,  on a  consolidated  basis,  sustain  from  continuous
operations,  excluding  noncash events,  a loss of no more than  $13,000,000 for
each of the  fiscal  quarters  ending on  3/31/99  and  6/30/99,  provided  that
Borrower may not sustain from continuous operations, excluding noncash events, a
loss of more than  $20,000,000  in the  aggregate  for both  quarters  combined.
Thereafter,  on a consolidated  basis, have a minimum continuous  operations net
profit of at least $1.00 for each fiscal year.

Comments Regarding Exceptions: See Attached.


Sincerely,


SIGNATURE


TITLE


DATE


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