-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UjlxSi6fIfINEug0dY2xllJg54DENo2u1vT75Vs+M4Kcn3r6jMhfc/QsVPCDIB9+ B541MiHh25oAtetOyEkeWw== 0001141218-03-000052.txt : 20030331 0001141218-03-000052.hdr.sgml : 20030331 20030328215601 ACCESSION NUMBER: 0001141218-03-000052 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030326 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAAR SURGICAL COMPANY CENTRAL INDEX KEY: 0000718937 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 953797439 STATE OF INCORPORATION: DE FISCAL YEAR END: 0101 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11634 FILM NUMBER: 03627015 BUSINESS ADDRESS: STREET 1: 1911 WALKER AVE CITY: MONROVIA STATE: CA ZIP: 91016 BUSINESS PHONE: 8183037902 MAIL ADDRESS: STREET 1: 1911 WALKER AVE CITY: MONROVIA STATE: CA ZIP: 91016 8-K 1 staar8k.txt CURRENT REPORT ON FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): March 26, 2003 STAAR SURGICAL COMPANY (Exact name of registrant as specified in its charter) Delaware 0-11634 95-3797439 (State or other jurisdiction) (Commission File Number) (I.R.S. Employer of incorporation or organization) Identification No.) 1911 Walker Avenue, Monrovia, California 91016 (Address of principal executive offices) (Zip Code) (626) 303-7902 (Registrant's telephone number, including area code) Item 5. Other Events and Regulation FD Disclosure Second Amended and Restated Revolving Line of Credit between the Company and Wells Fargo Bank On March 26, 2003, the Company and Wells Fargo Bank executed a Second Amended and Restated Revolving Line of Credit Agreement to, among other things, extend the maturity date of the Company's $3.0 million line of credit for one year to March 31, 2004. The line of credit, which has borne interest at a rate equal to the prime rate plus a variable interest margin determined on the basis of the Company's EBITDA, will bear interest at a rate equal to the prime rate (4.25% at March 27, 2003) plus an interest margin of 5%. In addition, the Company is required to pay a commitment fee of 1.25% per annum on the unused amount of the line of credit. All other terms and conditions are generally unchanged, except that the cash flow and operating income covenants of the agreement are suspended until the third quarter of 2003 and the minimum tangible net worth covenant was reduced from $24.0 million to $13.5 million. The Company's obligation to Wells Fargo Bank is secured by a first priority lien on substantially all of the Company's assets. A copy of the Second Amended and Restated Revolving Line of Credit Agreement is attached to this Report as Exhibit 10.1, and a copy of the related Second Amended and Restated Revolving Line of Credit Note is attached to this Report as Exhibit 10.2, each of which is incorporated herein by this reference. Item 7. Financial Statements and Exhibits (c) Exhibits: 10.01 Second Amended and Restated Revolving Line of Credit between the Company and Wells Fargo Bank, dated March 26, 2003.* 10.2 Second Amended and Restated Revolving Line of Credit Note, dated March 26, 2003. 99.1 Press release dated March 28, 2003, entitled "STAAR Surgical Company Renews Revolving Line of Credit." * All schedules and or exhibits have been omitted. Any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request. Item 9. Regulation FD Disclosure On March 27, 2003, the Company published a press release concerning the Second Amended and Restated Revolving Line of Credit Agreement. The text of the press release is attached to this Report as Exhibit 99.1, and is incorporated herein by this reference. -2- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: March 28, 2003 STAAR SURGICAL COMPANY By: /s/ John Bily ____________________________________ John Bily Chief Financial Officer -3- EX-1 3 staar8kex101.txt SECOND AMENDED AND RESTATED CREDIT AGREEMENT 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- 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- 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- 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- 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- 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- (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- (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- 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- 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- 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- (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- 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- (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- 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- 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- 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- 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- 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- 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. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] -20- 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 EX-2 4 staar8kex102.txt SECOND AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE EXHIBIT 10.2 ------------ SECOND AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE --------------------------------------------------------- $3,000,000.00 Monrovia, California March 26, 2003 FOR VALUE RECEIVED, the undersigned, STAAR SURGICAL COMPANY, a Delaware corporation ("Borrower"), promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association ("Bank"), at its office at 333 South Grand Avenue, Los Angeles, California 90071, 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 amount of three million dollars ($3,000,000.00), 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 and actual days elapsed) at a rate per annum equal at all times to the sum of the Prime Rate (as defined in the Credit Agreement referred to below) in effect from time to time plus 5.00%. (b) Payment of Interest. Interest accrued on this Note shall be payable on the first business day of each calendar month, commencing on April 1, 2003. (c) Default Interest. Upon the occurrence and during the continuation of any Event of Default (as defined in the Credit Agreement referred to below), 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 and actual days elapsed) equal to four percent (4%) above the rate of interest from time to time otherwise 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 the Second Amended and Restated Credit Agreement dated as of March 26, 2003 (as it may be amended, restated or otherwise modified from time to time, the "Credit Agreement") between Borrower and Bank and any other 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 Note at any time shall be the total amount advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for 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 March 31, 2004. -1- (b) Advances. Advances hereunder, to the total amount of the principal amount stated above, may be made by the holder at the oral or written request of (i) those persons who are authorized from time to time by Borrower (as evidenced by such documents as Bank may require) 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 Borrower, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of 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 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. CREDIT AGREEMENT: This Note is made pursuant to, and is subject to the terms and conditions of, the Credit Agreement. MISCELLANEOUS: (a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all amounts of principal and interest outstanding hereunder to be immediately due and payable, without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder, 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 the holder's in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including, without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including, 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. (b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. (c) Governing Law. This Note shall be governed by, and construed in accordance with, the laws of the State of California. (d) Amendment and Restatement. This Note amends and restates the Amended and Restated Revolving Line of Credit Note dated July 31, 2002 made by Borrower in favor of Bank. -2- IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. STAAR SURGICAL COMPANY By: -------------------------- Name: ------------------------------ Title: ----------------------------- -3- EX-3 5 staar8kex991.txt PRESS RELEASE EXHIBIT 99.1 ------------ STAAR Surgical Renews Revolving Line of Credit MONROVIA, Calif., March 28 -- STAAR Surgical Company (Nasdaq: STAA) today announced that it has extended the maturity date of the $3 million revolving line of credit it currently has with Wells Fargo Bank. The credit line will be used for general working capital purposes. This one-year agreement replaces the existing agreement that will mature on March 31, 2003. "This new line of credit will help support our growth strategies. We are pursuing new approvals for our high-margin Implantable Contact Lenses and Toric Implantable Contact Lenses. Once we receive those approvals, we'll initiate aggressive marketing programs to communicate the superior patient benefits of both products. In addition we continue to focus on regaining market share in our core intraocular lens business," said David Bailey, president of STAAR. "We continue to make solid progress in achieving our strategies and remain committed to reaching profitability during the second half of 2003." For additional information about STAAR Surgical, visit the Company's website at http://www.STAAR.com . All statements in this press release that are not statements of historical fact are forward-looking statements, including any projections of earnings, revenue, or other financial items, any statements of the plans, strategies, and objectives of management for future operations, any statements concerning proposed new products, services or developments, any statements regarding future economic conditions or performance, statements of belief and any statements of assumptions underlying any of the foregoing. These statements are based on expectations and assumptions as of the date of this press release and are subject to numerous risks and uncertainties, which could cause actual results to differ materially from those described in the forward-looking statements. The risks and uncertainties include the need to obtain regulatory approval for new products, acceptance of new products by medical practitioners and consumers, the rapid pace of technological change in the ophthalmic industry, general domestic and international economic conditions, and other factors beyond the control of STAAR Surgical Company, including those detailed from time to time in STAAR Surgical Company's reports filed with the Securities and Exchange Commission. STAAR Surgical Company assumes no obligation and does not intend to update these forward-looking statements. -----END PRIVACY-ENHANCED MESSAGE-----