Document:

<PAGE>

[LETTERHEAD] WELLS FARGO

                                   July 1, 2001

John Santos, Chief Financial Officer
Staar Surgical Company
1911 Walker Avenue
Monrovia, CA 91016

Dear Mr. Santos:

     This letter is to confirm that WELLS FARGO BANK, NATIONAL ASSOCIATION
("Bank") has agreed to extend the maturity date of that certain credit
accommodation granted by Bank to STAAR SURGICAL COMPANY ("Borrower") in the
maximum principal amount of Seven Million Dollars ($7,000,000.00) pursuant to
the terms and conditions of that certain letter agreement between Bank and
Borrower dated as of October 31, 2000, as amended from time to time (the
"Agreement").

     The maturity date of said credit accommodation is hereby extended until
October 1, 2001. Until such date, all terms and conditions of the Agreement
which pertain to said credit accommodation shall remain in full force and
effect, except as expressly modified hereby. The promissory note dated as of
October 31, 2000, executed by Borrower and payable to the order of Bank which
evidences said credit accommodation, a copy of which is attached hereto as
Exhibit A (the "Note"), shall be deemed modified as of the date this letter is
---------
acknowledged by Borrower to reflect the new maturity date set forth above. All
other terms and conditions of the Note remain in full force and effect, without
waiver or modification.

     Borrower acknowledges that Bank has not committed to make any renewal or
further extension of the maturity date of the above-described credit
accommodation beyond the new maturity date specified herein, and that any such
renewal or further extension remains in the sole discretion of Bank. This letter
constitutes the entire agreement between Bank and Borrower with respect to the
maturity date extension for the above-described credit accommodation, and
supersedes all prior negotiations, discussions and correspondence concerning
said extension.

<PAGE>

Staar Surgical Company
July 1, 2001
Page 2

     Please acknowledge your acceptance of the terms and conditions contained
herein by dating and signing one copy below and returning it to my attention at
the above address on or before July 16, 2001.

                                                     Very truly yours,

                                                     WELLS FARGO BANK,
                                                     NATIONAL ASSOCIATION

                                                     By:
                                                        -----------------------
                                                        Nancy Martorano
                                                        Vice President

Acknowledged and accepted as of                 :
                               -----------------

STAAR SURGICAL COMPANY

By: /s/ John Santos
   ----------------------------
    John Santos
    Chief Financial Officer

<PAGE>

WELLS FARGO BANK                                   REVOLVING LINE OF CREDIT NOTE
--------------------------------------------------------------------------------

                                    EXHIBIT A

$7,000,000.00
                                                         West Covina, California
                                                                October 31, 2000

     FOR VALUE RECEIVED, the undersigned Staar Surgical Company ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank")
at its office at San Gabriel Valley RCBO, 1000 Lakes Drive, Suite 250, West
Covina, CA 91790, or at such other place as the holder hereof may designate, in
lawful money of the United States of America and in immediately available funds,
the principal sum of $7,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the date
of its disbursement as set forth herein.

INTEREST:

     (a) Interest. The outstanding principal balance of this Note shall bear
         --------
interest (computed on the basis of a 360-day year, actual days elapsed) at a
rate per annum equal to the Prime Rate in effect from time to time. The "Prime
Rate" is a base rate that Bank from time to time establishes and which serves as
the basis upon which effective rates of interest are calculated for those loans
making reference thereto. Each change in the rate of interest hereunder shall
become effective on the date each Prime Rate change is announced within Bank.

     (b) Payment of Interest. Interest accrued on this Note shall be payable on
         -------------------
the 1st day of each month, commencing November 1, 2000.

     (c) Default Interest. From and after the maturity date of this Note, or
         ----------------
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to 4% above the rate of
interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

     (a) Borrowing and Repayment. Borrower may from time to time during the term
         -----------------------
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms, and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on April 1, 2001.

     (b) Advances. Advances hereunder, to the total amount of the principal sum
         --------
available hereunder, may be made by the holder at the oral or written request of
(i) John Santos, any one acting alone, who are authorized to request advances
and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (ii) any person, with respect to advances deposited to the credit of
any deposit account of any Borrower, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of each Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. The holder shall have
no obligation to determine whether any person requesting an advance is or has
been authorized by any Borrower.

     (c) Application of Payments. Each payment made on this Note shall be
         -----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof.

<PAGE>

     (c) Governing Law. This Note shall be governed by and construed in
         -------------
accordance with the laws of the State of California.

     IN WITNESS WHEREOF, the undersigned has executed this Note as of the date
first written above.

Staar Surgical Company

By: John Santos
    --------------------
    John Santos, Chief Financial Officer<PAGE>

                         SEVERANCE AND RELEASE AGREEMENT
                         -------------------------------

          This Severance and Release Agreement ("Agreement") is entered into by
and between STAAR Surgical Company, a Delaware corporation (the "Company") and
Thomas J. Chambers, an individual ("Chambers"), this 21/st/ day of August, 2001
based upon the following:

                                    RECITALS
                                    --------

     Whereas, on September 20, 1996 the Company and Chambers entered into that
certain "Employment Agreement";

     Whereas, the Company terminated Chambers' employment on July 6, 2000;

     Whereas, on or about November 12, 2000, Chambers filed a complaint with the
Department of Fair Employment and Housing alleging discrimination relating to
the termination of his employment (the "Complaint"); and

     Whereas, both Chambers and the Company wish to settle, finally and forever,
any and all issues relating to Chamber's employment with the Company and the
termination of his employment, including the Complaint;

     Whereas, the Company and Chambers wish to memorialize their agreement
relating to the termination of Chambers employment with the Company, the
severance benefits that are to be transferred or paid to Chambers as a result of
the termination of his employment, and Chambers waiver of all rights and claims
which he may have against the Company, if any.

     Now, therefore, in consideration of the mutual covenants and promises
contained herein and for other valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Company and Chambers agree as
follows:

                                    AGREEMENT
                                    ---------

     1. Incorporation of Recitals. The recitals to this Agreement are an
        -------------------------
integral part of this Agreement and are hereby incorporated as a part of this
Agreement as if set forth in it.

     2. Consideration for Agreement. In exchange for Chambers release of the
        ---------------------------
Company from any past, present and future obligations (if any), whether monetary
or otherwise, allegedly owed by the Company to Chambers based upon Chambers
employment and the termination thereof, the Company shall enter into a
Consulting Agreement with Chambers, a copy of which is attached hereto as Annex
A.

     3. Waiver of All Claims. Chambers agrees that he is not entitled to
        --------------------
receive, will not claim and expressly waives any entitlement to rights, benefits
or compensation from the Company other than as expressly set forth in this
Agreement.

                                       1

<PAGE>

     4. Complete Release by Chambers.
        ----------------------------

          (a) Release. Chambers irrevocably and unconditionally releases all of
the claims described in subsection (b) of this section 4 that he may now have
against the following persons or entities (the "Releasees"): the Company, all of
its past and present employees, officers, directors, stockholders, owners,
representatives, assigns, attorneys, agents, insurers, employee benefit programs
(and the trustees, administrators, fiduciaries and insurers of such programs)
and any other persons acting by, through, under or in concert with any of the
persons or entities listed in this subsection.

          (b) Claims Released. The claims released include all claims, promises,
debts, causes of action or similar rights of any type or nature Chambers has or
had which in any way relate to (i) Chambers employment with the Company, or the
termination of that employment, such as claims for compensation, bonuses,
commissions, lost wages or unused accrued vacation or sick pay, (ii) the design
or administration of any employee benefit program or Chambers entitlement to
benefits under any such program, (iii) any claims to attorneys' fees and/or
other legal costs, (iv) the Complaint, and (v) any other claims or demands
Chambers may, on any basis, have. The claims released include, but are not
limited to, claims arising under any of the following statutes or common law
doctrines:

               (i) Anti-Discrimination Statutes, such as the Age Discrimination
          in Employment Act, which prohibits age discrimination in employment;
          the Civil Rights Act of 1991, Title VII of the Civil Rights Act of
          1964, and Section 1981 of the Civil Rights Act of 1866, which prohibit
          discrimination based on race, color, national origin, religion or sex;
          the Equal Pay Act, which prohibits paying men and women unequal pay
          for equal work; the Americans With Disabilities Act, which prohibits
          discrimination against the disabled; the California Fair Employment
          and Housing Act, which prohibits discrimination in employment based
          upon race, color, national origin, ancestry, physical or mental
          disability, medical condition, martial status, sex, or age; and any
          other federal, state or local laws or regulations prohibiting
          employment discrimination.

               (ii) Federal Employment Statutes, such as the Employee Retirement
          Income Security Act of 1974, which, among other things, protects
          pension or health plan benefits; and the Fair Labor Standards Act of
          1938, which regulates wage and hour matters.

               (iii) Other Laws, such as any federal, state or local laws
          restricting an employer's right to terminate employees or otherwise
          regulating employment; any federal, state or local law enforcing
          express or implied employment contracts or requiring an employer to
          deal with employees fairly or in good faith; and any other federal,
          state or local laws providing recourse for alleged wrongful discharge,
          physical or personal injury, emotional distress, fraud, negligent
          misrepresentation, libel, slander, defamation and similar or related
          claims. The laws referred to in this paragraph include statutes,
          regulations, other administrative guidance and common law doctrines.

                                       2

<PAGE>

          (c) Release Extends to Both Known and Unknown Claims. This release
covers both claims that Chambers knows about and those Chambers does not know
about. Chambers understands the significance of this release of unknown claims
and his waiver of any statutory protection against a release of unknown claims.
Chambers expressly waives the protection of any such governmental statutes or
regulations.

          More particularly, and without limitation, Chambers acknowledges that
Chambers has read and is familiar with and understands the provisions of Section
1542 of the California Civil Code, which provides: "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 TO HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

          CHAMBERS EXPRESSLY WAIVES ANY RIGHT OR CLAIM OF RIGHT CHAMBERS MAY
HAVE UNDER SECTION 1542 OF THE CALIFORNIA CIVIL CODE.

          (d) Ownership of Claims. Chambers represents that he has not assigned
or transferred, or purported to assign or transfer, all or any part of any claim
released by this Agreement.

          (e) Release Does Not Extend to Consulting Agreement. Nothing in this
section 4 will release the Company from its obligations under the Consulting
Agreement.

     5.   Chambers Promises. In addition to the release of claims provided for
          -----------------
in section 4, Chambers promises never to file or prosecute a lawsuit,
administrative complaint or charge, or other complaint or charge asserting any
claims that are released by this Agreement. Chambers represents that, with the
exception of the Complaint, he has not filed or caused to be filed any lawsuit,
complaint or charge with respect to any claim this Agreement releases. Chambers
further agrees to request any government agency or other body assuming
jurisdiction of the Complaint or any other complaint or charge relating to a
released claim to withdraw from the matter or dismiss the matter with prejudice.

     6.   Consulting with Attorney. Chambers acknowledges that the Company has
          ------------------------
advised him to obtain the services of an attorney to review this Agreement and
to advice him regarding it. Chambers acknowledges he has had ample opportunity
to consult with an attorney prior to executing this Agreement and has, in fact,
done so.

     7.   Period for Consideration of Agreement. Chambers acknowledges that
          -------------------------------------
Chambers was given a period of 21 days to review and consider this Agreement
before signing it. Chambers further acknowledges that: (1) Chambers took
advantage of this period to consider this Agreement before signing it; (2)
Chambers carefully read this Agreement; and (3) Chambers fully understands this
Agreement and is entering into it voluntarily and without coercion or duress.

                                       3

<PAGE>

     8.   Severability. The provisions of this Agreement are severable. If any
          ------------
part of it is found to be unenforceable, all other provisions shall remain fully
valid and enforceable.

     9.   Choice of Laws/Venue. This Agreement shall be governed by the laws of
          --------------------
the State of California, and any action or proceeding relating to this Agreement
shall be heard solely before the Courts of the County of Los Angeles,
California.

     10.  Nature, Effect and Interpretation of this Agreement.
          ---------------------------------------------------

          (a) Entire Agreement. This is the entire Agreement between Chambers
and the Company; it may not be modified or cancelled in any manner except by a
writing signed by both the Company and Chambers. The Company has made no
promises or representations to Chambers other than those in this Agreement and
the Consulting Agreement and Chambers has made no promises or representations to
the Company other than those in this Agreement and the Consulting Agreement.

          (b) Successors and Assigns. This Agreement shall bind both the
Company's and Chambers' heirs, administrators, representatives, executors,
successors and assigns, and shall inure to the benefit of all Releasees and
their respective heirs, administrators, representatives, executors, successors
and assigns.

          (c) Interpretation. This Agreement shall be construed as a whole
according to its fair meaning, and not strictly for or against any of the
parties. Unless the context indicates otherwise, the term "or" shall be deemed
to include the term "and" and the singular or plural number shall be deemed to
include the other. Paragraph headings used in this Agreement are intended solely
for convenience of reference and shall not be used in the interpretation of any
of this Agreement. It is acknowledged that neither party shall be construed to
be solely responsible for the drafting hereof, and therefore any ambiguity shall
not be construed against either party as the alleged draftsman of this
Agreement.

          (d) Counterparts and Facsimiles. For the convenience of the parties to
this Agreement, this document may be executed by facsimile signatures and in
counterparts that shall together constitute the agreement of the parties as one
and the same instrument.

          (e) Implementation. The Company and Chambers both agree that, without
the receipt of further consideration, they will sign and deliver any documents
and do anything else that is necessary in the future to make the provisions of
this Agreement effective.

     11. Notices. Unless otherwise specifically provided in this Agreement, all
         -------
notices, demands, requests, consents, approvals or other communications
(collectively and severally called "Notices") required or permitted to be given
hereunder, or which are given with respect to this Agreement, shall be in
writing, and shall be given by: (1) personal delivery (which form of Notice
shall be deemed to have been given upon delivery), (2) by telegraph or by
private airborne/overnight delivery service (which forms of Notice shall be
deemed to have been given upon confirmed delivery by the delivery agency), (3)
by electronic or facsimile or telephonic transmission, provided the receiving
party has a compatible device or confirms receipt thereof (which forms of
Notice shall be deemed delivered upon confirmed transmission or confirmation of
receipt), or (4) by mailing in the United States mail by registered or certified
mail, return receipt requested, postage prepaid (which forms of Notice shall be
deemed to have been given upon the fifth (5th) business day following the date
mailed). Notices shall be addressed to the parties as follows:

         Chambers:       Mr. Thomas J. Chambers
                         112 Harvard Avenue, #342
                         Claremont, California 91711

         Company:        STAAR Surgical Company
                         1911 Walker Avenue
                         Monrovia, California 91016
                         Attn: Chief Executive Officer

     12. Revocation Period. Chambers understands that he has a period of seven
         -----------------
days to revoke this Agreement from the date he signs it.

         PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.

     Executed at Claremont, California this 21st day of August 2001.
                                            ----

                                            "Chambers"

                                            /s/ Thomas J. Chambers
                                            __________________________________
                                            Thomas J. Chambers

     Executed at Monrovia, California this 30th day of August 2001.
                                           ----

                                            "COMPANY"

                                            STAAR Surgical Company

                                            By: /s/ David Bailey
                                               _______________________________
                                               David Bailey, President

                                        4

<PAGE>

                                     ANNEX A

                              CONSULTING AGREEMENT

                                        6

<PAGE>

                              CONSULTING AGREEMENT

THIS AGREEMENT is made effective as of August 9, 2001, by and between STAAR
Surgical Company (hereafter "STAAR"), 1911 Walker Avenue, California 91016, and
Thomas Chambers (hereafter " Mr. Chambers"), 112 Harvard Avenue # 342,
Claremont, California 91711 as follows:

     1. Term. STAAR hereby retains Mr. Chambers for consulting services pursuant
to the terms described herein, and hereby accepts such retention, commencing as
of the date of this Agreement and expiring on August 8, 2003 (hereafter the
"Term").

     2. Consulting Services. Mr. Chambers shall perform consulting services as
mutually agreed upon between Mr. Chambers and STAAR (hereafter the "Consulting
Services") as follows:

     Be available at mutually agreeable times, but no more time than eight hours
in any one calendar month, to provide background information personally to David
Bailey, the President, or subsequent Presidents, of STAAR Surgical Company
related to past events that occurred during Mr. Chambers' employment with STAAR
which ended on July 6, 2000.

     3. Compensation. As consideration for Mr. Chambers' performance of the
Consulting Services, STAAR hereby grants to Mr. Chambers the STAAR stock option
grant totaling 10,000 units now available under a stockholder approved stock
option plan. Pricing would be at the close of business on the day of Chambers'
signing. All such stock options must be exercised within three (3) months
following the expiration date of this Agreement; any options remaining
unexercised after such three month period shall expire. In addition, Mr.
Chambers shall receive cash compensation in the total of $107,692.30 paid in
even installments over the first 8 months of this Agreement. The first amount to
be due and payable 28 days from Mr. Chambers' receipt of the Consulting
Agreement and the Severance and Release Agreement, and the effective date of the
agreement. Subsequent payments to be made on the 25th of each month.

     4. Outside Employment. STAAR acknowledges that during the term of this
Agreement, Mr. Chambers may be engaged by one or more entities, businesses or
institutions that are in direct competition with Staar. Mr. Chambers represents
that he is not and shall not become a party to any agreement which conflicts
with the Consulting Services described herein. Staar acknowledges that the
information sought from Mr. Chambers shall not compromise or otherwise conflict
with his present engagements or employment.

     5. "STAAR Confidential information" shall mean all financial, operational
and administrative records, research data and information, technical
information, commercial and research strategies, trade secrets, and know-how
disclosed by STAAR to Mr. Chambers prior to July 7, 2000. Any research data and
technical information, commercial and research strategies, and know-how
independently obtained by Mr. Chambers after his employment at STAAR shall not
be considered "STAAR Confidential information".

                                        1

<PAGE>

     (a) Confidentiality and Non-Use. Except as provided above, Mr. Chambers
will maintain the STAAR Confidential Information in confidence, and will not
disclose any STAAR Confidential Information to any third party without STAAR's
prior written consent. Mr. Chambers will use the STAAR Confidential Information
solely for the purpose of providing the Consulting Services to STAAR unless
STAAR shall otherwise agree in writing.

     (b) Exceptions. In addition to the exceptions described above, Mr.
Chambers' obligations of non-use and confidentiality shall not apply to any
information and know-how which: (i) can be shown by contemporaneous
documentation to have rightfully been in Mr. Chambers' possession prior to
disclosure by STAAR; (ii) at the time of disclosure hereunder is, or thereafter
becomes, through no fault of Mr. Chambers, part of the public domain; or (iii)
is furnished to Mr. Chambers by a third party after the time of disclosure
hereunder without the breach of any duty to STAAR.

     6. Execution of Papers, Oaths and Testimony. Mr. Chambers agrees that at
any time, whether it be during the term of this Agreement or any extension
thereof, or after the expiration or termination of this Agreement, upon the
request of STAAR and without further compensation, but at no expense to Mr.
Chambers, Mr. Chambers shall perform any lawful acts, including the execution of
papers and oaths and the giving of testimony, that in the opinion of STAAR, its
successors or assigns may be necessary or desirable in order to obtain, sustain,
reissue and renew, and in order to enforce, perfect; record and maintain, patent
applications and United States and foreign patents on STAAR's inventions, and
copyright registrations on STAAR's inventions.

     7. Notice. Any notice to STAAR shall be addressed as follows or as shall be
specified by a party in writing:

If to STAAR:                                             If to Tom Chambers:

STAAR Surgical Company                                   Tom Chambers
1911 Walker Avenue                                       112 Harvard Avenue #342
Monrovia, California 91016                               Claremont, CA 91711
Attention: David Bailey

     8. Amendment and Survival. This Agreement may be amended or renewed only
with the written agreement of both parties and for new consideration.

     9. Assignment and Governing Law. This Agreement and any rights under it may
not be assigned by Mr. Chambers without STAAR's prior written consent. Any
unauthorized attempt to assign by Mr. Chambers shall be void. This Agreement
shall be governed by the laws of the State of California, and any action
connected herewith shall be brought in Los Angeles County Courts.

     10. Not an Employee. Mr. Chambers is an independent contractor and is not
an employee or agent of STAAR Mr. Chambers shall not be entitled to any benefits
or compensation from STAAR except as set forth in this Agreement. Mr. Chambers
shall be solely responsible for meeting all of his tax requirements.
Additionally, nothing contained in this Agreement shall entitle Mr. Chambers to
the right or authority to make any representation on behalf of or bind STAAR to
others in any manner, except as may be specifically authorized in writing by
STAAR.

                                        2

<PAGE>

     11. Waiver and Severability. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver shall be binding unless executed in writing by the party making the
waiver. In the event of a conflict between the provisions in the body of this
Agreement, the terms in the body of this Agreement will control.

     12. Entire Agreement. This Agreement is the entire agreement of the parties
relating to the subject matter hereof. Any prior negotiations, correspondence,
memoranda or agreements relating to the Consulting Services are superseded in
total by this Agreement; and the parties' rights, duties liabilities and
remedies with respect to the Consulting Services and this Agreement are limited
to those expressly set forth in this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.

STAAR SURGICAL COMPANY                        THOMAS CHAMBERS

By: /s/ David Bailey          8/30/01         /s/ Thomas J. Chambers  8/21/01
    ---------------------------------         -------------------------------
    David Bailey                Date          Signature                 Date
    Chief Executive Officer
    and President

                                        3

<PAGE>

                                   Appendix A

Be available to provide background information to the President of STAAR
Surgical Company related to past events that occurred during Tom Chambers'
employment with STAAR. Conditions to be honored by STAAR.

     .    Reasonable notice and mutually agreed timing for any meeting or
          discussion
     .    Maximum time not to exceed eight hours in any one-month period.

                                        4

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