STAAR Surgical Company (Form: 8-K)

For value received, and on the terms and subject to the conditions set forth herein, STAAR Surgical Company, a corporation formed and existing under the laws of the State of Delaware (the “Company”), HEREBY PROMISES TO PAY to Broadwood Partners, L.P. (the “Noteholder”), on the Maturity Date (as defined below) the principal sum of US$4,000,000 (the “Loan”), plus any unpaid interest accrued thereon, or such lesser amount as shall be equal to the unpaid principal amount of the Loan plus such interest. The Company hereby promises to make principal repayments and to pay interest on the dates and at the rate or rates provided for herein.

The Noteholder will receive warrants (the “Warrants”) issued hereunder and under that certain Warrant Agreement dated the date hereof between the Company and the Noteholder (the “Warrant Agreement”) to purchase that number of shares of common stock, par value $.01 per share (the “Common Stock”) as set forth herein and in the Warrant Agreement at an exercise price of $6.00 (the “Exercise Price”) per share (the “Warrant Shares”).

SECTION 1. Certain Terms Defined. The following terms for all purposes of this Note shall have the respective meanings specified below.

“Business Day” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized by law to close.

“Change of Control” has the meaning set forth in the Company’s Credit and Security Agreement, dated June 8, 2006 between the Company and Wells Fargo Bank, National Association, provided that no Change of Control shall be deemed to occur as a result of (i) acquisition of securities of the Company by the Noteholder or its affiliates, or (ii) changes in the Board of Directors resulting from annual uncontested elections.

“Common Stock” has the meaning set forth in the introductory paragraphs.

“Exercise Price” has the meaning set forth in the introductory paragraphs.

“Intellectual Property Rights” has the meaning set forth in Section 8(q).

“Maturity Date” means March 21, 2010, or such earlier date as may be provided in Section 7; provided that if any such date is not a Business Day, then such date shall be the next succeeding Business Day.

“Note” shall mean this Promissory Note as amended, from time to time, in accordance with the terms hereof.


“Notice” has the meaning set forth in Section 10(j).

“Noteholder” has the meaning set forth in the introductory paragraphs.

“Securities Act” has the meaning set forth in Section 8(w).

“Subsidiary” has the meaning set forth in Section 8(f).

“Warrants” has the meaning set forth in the introductory paragraphs.

“Warrant Agreement” has the meaning set forth in the introductory paragraphs.

“Warrant Shares” has the meaning set forth in the introductory paragraphs.

SECTION 2.		Loan Drawdown.

The Noteholder shall make the Loan to the Company within twenty four hours after the execution of this Note.

The Loan shall mature, and the principal amount thereof shall become immediately due and payable (together with unpaid interest accrued thereon) on the Maturity Date.

The unpaid principal amount of the Loan outstanding shall bear interest at a rate equal to ten percent (10%) per annum. Notwithstanding the foregoing, upon an Event of Default, this Note shall bear interest on and after the date of such Event of Default at a rate equal to the lesser of (i) the maximum interest rate permitted by applicable law and (ii) 20%.

Interest shall be payable quarterly in arrears on the last day of the Company’s fiscal quarter (or if any such day is not a Business Day, then on the next succeeding Business Day) provided, however, the first interest payment shall not be due until June 30, 2007. Interest shall be computed on the basis of a year of 365 days and paid for the actual number of days elapsed.

So long as this Note shall remain outstanding the Company shall, in addition to the Warrants issued under the Warrant Agreement, issue Warrants to the Noteholder on each of the following dates in an amount equal to the “Maximum Number of Shares” set forth opposite such date times the fraction resulting from the then outstanding principal balance on this Note divided by $4,000,000.


Date	Maximum Number of Shares
6/30/07		30,000

9/30/07		30,000

12/31/07		31,500

3/31/08		31,500

6/30/08		35,000

9/30/08		35,000

12/31/08		38,500

3/31/09		38,500

6/30/09		42,000

9/30/09		42,000

12/31/09		45,500

3/21/10		45,500

Except for the amount of Warrants and the date of issuance set forth above, the Warrants issued under this Section 5 shall have all of the same terms and conditions (including, without limitation, Exercise Price, term and adjustment mechanisms) as the Warrants issued under the Warrant Agreement.

(a) Optional Prepayments. The Company may prepay the Loan, upon thirty (30) days prior written notice to the Noteholder, in whole or in part at any time or from time to time without penalty or premium by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Any such prepayments made under this Section 6 shall be in minimum increments of $400,000.

(b) Mandatory Prepayments. The Company shall immediately repay the Loan, plus any unpaid interest accrued thereon upon a Change of Control.

All payments of principal and interest on the Loan by the Company hereunder shall be made not later than 12:00 Noon (New York City time) on the date when due either by cashier’s check, certified check or by wire transfer of immediately available funds to the Noteholder’s account at a bank in the United States specified by the Noteholder in writing to the Company without reduction by reason of any set-off or counterclaim.

(b) any interest on the Loan shall not be paid within five (5) Business Days of when it was due;

(c) the Company breaches any covenant hereunder and such breach is not cured within thirty (30) days after notice from the Noteholder;

(d) any representation or warranty of the Company made in this Note shall be incorrect when made in any material respect;

(e) the Company or any Subsidiary shall default in the payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any material Indebtedness of the Company or any Subsidiary involving the borrowing of money or the extension of credit in excess of $500,000, or a default shall occur in the performance or observance of any obligation or condition with respect to such Indebtedness if the effect of such default is to accelerate the maturity of any such Indebtedness, or such default shall continue unremedied for any applicable period of time sufficient to permit the holder or holders of such Indebtedness, or any trustee or agent for such holders, to cause such Indebtedness to become due and payable prior to its expressed maturity;

(f) any judgment or order for the payment of money in excess of $500,000 shall be rendered against the Company or any Subsidiary, shall remain unpaid, and shall not be covered by insurance;

(g) a court shall enter a decree or order for relief in respect of the Company or any Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or any Subsidiary or for any substantial part of the property of the Company or any Subsidiary or ordering the winding up or liquidation of the affairs of the Company or any Subsidiary, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or

(h) the Company or any Subsidiary shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or any Subsidiary or for any substantial part of the property of the Company or any Subsidiary, or the Company or any Subsidiary shall make any general assignment for the benefit of creditors.

If an Event of Default described in (g) or (h) above shall occur, the principal of and accrued interest on the Loan shall become immediately due and payable without any declaration or other act on the part of the Noteholder. Immediately upon the occurrence of any Event of Default described in (g) or (h) above, or upon failure to pay this Note on the Maturity Date, the Noteholder, without any notice to the Company, which notice is expressly waived by the Company, may proceed to protect, enforce, exercise and pursue any and all rights and remedies available to the Noteholder under this Note, or at law or in equity.

If any Event of Default in (a) – (f) above shall occur for any reason, whether voluntary or involuntary, and be continuing, the Noteholder may by notice to the Company declare all or any portion of the outstanding principal amount of the Loan to be due and payable, whereupon the full unpaid amount of the Loan which shall be so declared due and payable shall be and become immediately due and payable without further notice, demand or presentment.

(a) The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company does not have any Subsidiaries except as set forth on Schedule 1 hereto. Each Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of organization and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted. The Company and each such Subsidiary is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary.

(b) The Company has the requisite legal and corporate power and authority to enter into, issue and perform this Note and the Warrant Agreement in accordance with the terms hereof and thereof. The execution, delivery and performance of this Note and the Warrant Agreement by the Company and the consummation by it of the transactions contemplated hereby or thereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization of the Company, its board of directors or stockholders is required. When executed and delivered by the Company, this Note and the Warrant Agreement shall constitute valid and binding obligations of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by other equitable principles of general application.

(c) The execution, delivery and performance of this Note, the Warrant Agreement and the consummation by the Company of the transactions contemplated hereby or thereby, do not and will not (i) violate or conflict with any provision of the Company’s certificate of incorporation or bylaws, each as amended to date, or any Subsidiary’s comparable charter documents, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries’ respective properties or assets are bound, or (iii) result in a violation of any federal, state, local or foreign statute, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries are bound or affected. Neither the Company nor any of its Subsidiaries is required under federal, state, foreign or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Note or Warrant Agreement.

(d) The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency or any other person in order for it to execute, deliver or perform any of its obligations under or contemplated by this Note or Warrant Agreement, in each case in accordance with the terms hereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.

(e) The common stock of the Company is registered pursuant to Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and except for the Company’s 10-K for the year ended December 29, 2006, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the “Commission Documents”). At the times of their respective filings, the Form 10-K for the fiscal year ended December 30, 2005 (the “Form 10-K”) and each subsequently filed Form 10-Q (collectively, the “Form 10-Q”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents, and the Form 10-Q and Form 10-K did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of the Company included in the Commission Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto. Such consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such consolidated financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(f) Schedule 1 hereto sets forth each Subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s ownership of the outstanding stock or other interests of such Subsidiary. For the purposes of this Agreement, “Subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries. All of the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable. There are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock. Neither the Company nor any Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence. Except as set forth in the Commission Documents, neither the Company nor any Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of any Subsidiary.

(g) Except as set forth in the Commission Documents or set forth in the 8-K to be filed by the Company on March 21, 2007, since December 30, 2005, the Company has not experienced or suffered any material adverse effect and the Company is not aware of any fact or circumstance that is reasonably likely to have a material adverse effect on the Company.

(h) Except as set forth in the Commission Documents, neither the Company nor any of its Subsidiaries has incurred any liabilities, obligations, claims or losses (whether liquidated or unliquidated, secured or unsecured, absolute, accrued, contingent or otherwise) other than those incurred in the ordinary course of the Company’s or its Subsidiaries respective businesses.

(i) Since December 30, 2005, except for the circumstances described on Schedule 2 hereto, no event or circumstance has occurred or exists with respect to the Company or its Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, which, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

(j) Except as set forth in the Commission Documents, neither the Company nor any Subsidiary has any outstanding secured or unsecured Indebtedness. For the purposes of this Agreement, “Indebtedness” shall mean (a) any liabilities for borrowed money or amounts owed in excess of $100,000 (other than trade accounts payable incurred in the ordinary course of business) and (b) all guaranties, endorsements and other contingent obligations in respect of Indebtedness of others, whether or not the same are or should be reflected in the Company’s balance sheet (or the notes thereto).

(k) Except as set forth in the Commission Documents, there is no Indebtedness of the Company that is senior to or ranks pari passu with this Note in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise.

(l) Except as set forth in the Commission Documents, each of the Company and the Subsidiaries has good and valid title to all of its real and personal property, free and clear of any mortgages, pledges, charges, liens, security interests or other encumbrances. Any leases of the Company and each of its Subsidiaries are valid and subsisting and in full force and effect.

(m) The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary has been refused any insurance coverage sought or applied for and neither the Company nor any such Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a material adverse effect.

(n) Except as set forth in the Commission Documents, (i) there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary which questions the validity of this Note or any of the transactions contemplated hereby or any action taken or to be taken pursuant hereto, (ii) there is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding pending or, to the knowledge of the Company, threatened against or involving the Company, any Subsidiary or any of their respective properties or assets and (iii) there are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Company or any Subsidiary or any officers or directors of the Company or Subsidiary in their capacities as such.

(o) Except as set forth in the Commission Documents, (i) the business of the Company and the Subsidiaries has been and is presently being conducted in compliance with all applicable federal, state and local governmental laws, rules, regulations and ordinances and (ii) the Company and each of its Subsidiaries have all franchises, permits, licenses, consents and other governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it.

(p) Except as set forth in the Commission Documents, (i) the Company and each of the Subsidiaries has accurately prepared and filed all federal, state and other tax returns required by law to be filed by it, has paid or made provisions for the payment of all taxes shown to be due and all additional assessments, and adequate provisions have been and are reflected in the consolidated financial statements of the Company and the Subsidiaries for all current taxes and other charges to which the Company or any Subsidiary is subject and which are not currently due and payable. The Company has no knowledge of any additional assessments, adjustments or contingent tax liability (whether federal or state) of any nature whatsoever, whether pending or threatened against the Company or any Subsidiary for any period, nor of any basis for any such assessment, adjustment or contingency.

(q) The Company and the Subsidiaries own or possess adequate rights or licenses to use all trademarks, service marks, and all applications and registrations therefor, trade names, patents, patent rights, copyrights, original works of authorship, inventions, licenses, approvals, governmental authorizations, trade secrets and other intellectual property rights (“Intellectual Property Rights”) necessary to conduct their respective businesses as now conducted. Except as disclosed in the Commission Documents, none of the Company’s Intellectual Property Rights have expired or terminated, or are expected to expire or terminate, within two years from the date of this Agreement. The Company does not have any knowledge of any material infringement by the Company or its Subsidiaries of Intellectual Property Rights of others. There is no material claim, action or proceeding pending, or to the knowledge of the Company, being threatened, against the Company or its Subsidiaries regarding its Intellectual Property Rights. The Company is unaware of any material facts or circumstances which might give rise to any of the foregoing infringements or claims, actions or proceedings. The Company and its Subsidiaries have taken reasonable security measures to protect the secrecy, confidentiality and value of all of their material Intellectual Property Rights.

(r) Except as disclosed in the Commission Documents, the Company and each of its Subsidiaries has the unrestricted right to vote, and (subject to limitations imposed by applicable law) to receive dividends and distributions on, all capital securities of their respective Subsidiaries.

(s) There are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company, any Subsidiary or any of their respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its Subsidiaries, or any person owning at least 5% of the outstanding capital stock of the Company or any Subsidiary or any member of the immediate family of such officer, employee, consultant, director or stockholder or any corporation or other entity controlled by such officer, employee, consultant, director or stockholder, or a member of the immediate family of such officer, employee, consultant, director or stockholder which, in each case, is required to be disclosed in the Commission Documents or in the Company’s most recently filed definitive proxy statement on Schedule 14A, that is not so disclosed in the Commission Documents or in such proxy statement.

(t) The records and documents of the Company and its Subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company or any Subsidiary. Except as set forth in the Commission Documents, the Company and each of its Subsidiaries maintain a system of internal accounting controls sufficient, in the judgment of the Company’s management, to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate actions are taken with respect to any differences.

(u) The Company is in compliance with the applicable provisions of the Sarbanes-Oxley Act of 2002, and the rules and regulations promulgated thereunder.

(v) The Company is not in violation of the listing requirements of the Nasdaq Global Market and has no knowledge of any facts which would reasonably lead to delisting or suspension of its common stock in the foreseeable future.

(w) The Warrant when issued and delivered will be duly and validly issued and will be free of all liens and restrictions on transfer other than any restrictions on transfer under the Securities Act of 1933, as amended (the “Securities Act”).

(x) The Warrant Shares have been duly reserved for issuance by the Company in sufficient number to cover the exercise of all of the Warrants. The issuance of the Warrant Shares upon exercise of the Warrant has been duly authorized by the Company and the Warrant Shares when delivered in accordance with the Warrant, will be validly issued, fully paid and non-assessable, and free of all liens and restrictions on transfer other than any restrictions on transfer under the Securities Act.

(y) The offer, issuance, sale and delivery of the Warrant and Warrant Shares will not under current laws and regulations require compliance with the prospectus delivery or registration requirements of the Securities Act.

(a) The Company and each Subsidiary shall maintain its existence and authority to conduct its business as presently contemplated to be conducted;

(b) The Company shall comply, and cause each Subsidiary to comply, with all applicable laws, rules, regulations and orders applicable to the Company and each Subsidiary;

(c) The Company shall keep and cause each Subsidiary to keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made;

(d) The Company shall not enter into any agreement in which the terms of such agreement would restrict or impair the right or ability to perform of the Company or any Subsidiary under this Note;

(e) The Company and its Subsidiaries shall maintain insurance with responsible companies in such amounts and against such risks as is currently carried by the Company and its Subsidiaries;

(g) The Company shall maintain its listing on the Nasdaq Global Market and neither the Company nor any of its Subsidiaries shall take any action which would be reasonably expected to result in the delisting or suspension of the Company’s common stock on the Nasdaq Global Market.

(h) The net proceeds from this Note shall be used by the Company for general corporate purposes, which may include additions to working capital;

(i) The Company shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would permit such termination; and

(j) If the Company shall at any time offer to sell Equity Securities to any person other than the Noteholder, then the Company shall ensure that the Noteholder will be permitted to participate (the “Participation Right”) on a pro rata basis in any such offering until the later of (A) one year from the execution of this Note or (B) such time when this Note is no longer outstanding. For the purposes hereof, the Noteholder shall be able to include all shares and warrants (assuming the exercise therof) owned in any pro rata calculation with respect to this paragraph as of the closing date of any such offering. The term “Equity Securities” shall mean (i) any shares of any class of capital stock of the Company, and (ii) any debt or equity outstanding or similar instrument convertible into or exercisable or exchangeable for, with or without consideration, any shares of any class of capital stock of the Company. Notwithstanding the foregoing, the Participation Right shall not apply to any offering for the sole purpose of issuing Equity Securities: (i) to directors, officers, employees, consultants, advisors or other service providers, (ii) pursuant to the conversion or exercise of convertible or exercisable securities outstanding on the date hereof, (iii) in connection with a bona fide acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, (iv) in connection with any stock split, stock dividend, recapitalization, reclassification or similar event, (v) to banks, financial institutions, leasing companies, or other credit providers solely for the purposes of obtaining credit or lease financing or debt securities or securitizations, and (vi) to strategic or commercial partners or persons or entities with which the Company has business relationships.

If after the Company has delivered to the Noteholder a notice (the “Notice”) stating its intention to offer Equity Securities, the number of Equity Securities offered to the Noteholder to maintain its pro rata share of all Equity Securities, and the price and terms relating thereto, Noteholder does not elect to purchase all of Noteholder’s pro rata share of all Equity Securities by written notice received by the Company within three (3) days of the Company having delivered the Notice to the Noteholder, the Company shall be free to offer the remaining portion of Noteholder’s pro rata share of all Equity Securities to any other person or entity.

(a) Neither the Company nor any Subsidiary shall sell, transfer or otherwise dispose of any of its properties, assets and rights including, without limitation, its software and intellectual property, to any person except for sales of obsolete assets and sales to customers in the ordinary course of business or with the prior written consent of the Noteholder;

(b) Neither the Company nor any Subsidiary will become a party to any transaction with any person who is an affiliate of the Company or any Subsidiary, except transactions in the ordinary course of business or upon fair and reasonable terms that are fully disclosed to the Noteholder and are no less favorable to the Company or such Subsidiary than would be obtained in a comparable arm’s length transaction with a person not an affiliate of the Company or such Subsidiary;

(c) Neither the Company nor any Subsidiary shall merge or consolidate with any other person or entity, or sell or transfer all or substantially all of its assets without prior written consent of the Noteholder; and

(d) Neither the Company nor any of the Subsidiaries will liquidate or dissolve or instruct or grant resolutions to any liquidator of the Company or any Subsidiary.

The Company may not transfer or assign this Note nor any right or obligation hereunder to any person or entity without the prior written consent of the Noteholder. The Noteholder may transfer or assign this Note without the prior consent of the Company.

SECTION 13. Powers And Remedies Cumulative; Delay Or Omission Not Waiver Of Event Of Default.

No right or remedy herein conferred upon or reserved to the Noteholder is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

No delay or omission of the Noteholder to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any Event of Default or an acquiescence therein; and every power and remedy given by this Note or by law may be exercised from time to time, and as often as shall be deemed expedient, by the Noteholder.

This Note may be modified only with the written consent of both the Company and the Noteholder.

(a) The Company will reimburse the Noteholder for reasonable legal fees and expenses (i) in connection with the transactions contemplated hereby, including without limitation the negotiation, documentation and execution of the confidentiality agreement, term sheet, Note and Warrant not to exceed $30,000 and (ii) any amendments to any of the documents contemplated in (i) above, and

(b) In the event that this Note is collected by law or through attorneys at law, or under advice therefrom, the Company agrees to pay all costs of collection, including reasonable attorneys’ fees, whether or not suit is brought, and whether incurred in connection with collection, trial, appeal, bankruptcy or other creditors’ proceedings or otherwise.

The Company agrees to indemnify and hold harmless the Noteholder (and their respective directors, officers, managers, partners, members, shareholders, affiliates, agents, successors and assigns, (an “Indemnified Party”) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by such Indemnified Party as a result of any inaccuracy in or breach of the representations, warranties or covenants made by the Company herein.

(a) The parties hereto hereby waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of or any default under this Note, except as specifically provided herein.

(b) Any provision of this Note which is illegal, invalid, prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity, prohibition or unenforceability without invalidating or impairing the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.

(c) This Note shall bind the Company and its successors and permitted assigns. The rights under and benefits of this Note shall inure to the Noteholder and its successors and assigns.

(d) The Section headings herein are for convenience only and shall not affect the construction hereof.

(e) All notices, requests, demands, consents, instructions or other communications required or permitted hereunder shall in writing and faxed, mailed or delivered to each party at the respective addresses of the parties, or at such other address or facsimile number as the Company shall have furnished to Noteholder in writing. All such notices and communications will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing or (v) on receipt of confirmation of delivery.

(f) In the event any interest is paid on this Note, which is deemed to be in excess of the then legal maximum rate, then that portion of the interest payment representing an amount in excess of the then legal maximum rate shall be deemed a payment of principal and applied against the principal of this Note.

THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY LITIGATION ARISING HEREUNDER. THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

BY ITS ACCEPTANCE OF THIS NOTE THE NOTEHOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE NOTEHOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE NOTEHOLDER MAKING THE LOAN EVIDENCED HEREBY.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed on the date indicated above.

THIS WARRANT AND THE SECURITIES ISSUABLE ON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS.

WHEREAS, STAAR Surgical Company, a Delaware corporation (the “Company”), has made a Promissory Note of even date herewith in the original principal amount of up to $4 million (the “Note”) for the benefit of, and to evidence the Company’s obligations to, Broadwood Partners, L.P., a limited partnership organized under the laws of Delaware (the “Warrantholder”);

WHEREAS, the Company desires to grant to Warrantholder, in consideration for the financing provided under Note, the right to purchase shares of its Common Stock pursuant to this Warrant Agreement (the “Agreement”);

NOW, THEREFORE, in consideration of the Warrantholder lending the funds described in the Note, and in consideration of the mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows:

For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase, from the Company, up to 70,000 fully paid and non-assessable shares of the Common Stock (as defined below) at a purchase price of $6.00 per share (the “Exercise Price”). The number and Exercise Price of such shares are subject to adjustment as provided in Section 8. As used herein, the following terms shall have the following meanings:

“Charter” means the Company’s Articles of Incorporation, Certificate of Incorporation or other constitutional document, as may be amended from time to time.

“Common Stock” means the Company’s common stock, $0.01 par value per share.

“Merger Event” means a reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) involving the Company in which the Company is not the surviving entity, or in which the outstanding shares of the Company’s capital stock are otherwise converted into or exchanged for shares or units of capital of another entity.

“Purchase Price” means, with respect to any exercise of this Agreement, an amount equal to the Exercise Price as of the relevant time multiplied by the number of shares of Common Stock requested to be exercised under this Agreement pursuant to such exercise.

Each right to purchase Common Stock hereunder shall expire on the sixth (6^th) anniversary of the Effective Date.

(a) Exercise. The purchase rights set forth in this Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the “Notice of Exercise”), duly completed and executed. Sixty-one (61) days following receipt of the Notice of Exercise, and subject to the prior payment of the Purchase Price in accordance with the terms set forth below, the Company shall issue to the Warrantholder a certificate for the number of shares of Common Stock purchased, and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the “Acknowledgment of Exercise”) indicating the number of shares which remain subject to future purchases, if any, under this Agreement, and affirming that with respect to such unexercised portion this Agreement remains in full force and effect.

(b) Method of Payment. The Purchase Price may be paid at the Warrantholder’s election either (i) by cash or check, or (ii) at the election of the Warrantholder, and at the Warrantholder’s sole discretion, by release of an equal amount of indebtedness under the Note. If the Warrantholder elects to pay the Purchase Price through such release of indebtedness, the amount so released will first be applied to any accrued interest and unpaid interest under the Note, and any remaining amount shall be applied to principal.

During the term of this Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Common Stock to provide for the exercise of the rights to purchase Common Stock as provided for herein.

No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Agreement, but in lieu of such fractional shares that might otherwise result from the adjustment rights of Section 8, the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect.

This Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder/stockholder of the Company prior to issuance of the certificate for the Common Stock delivered pursuant to the exercise of this Agreement under Section 3(a) hereof .

The Company shall maintain a registry showing the name and address of the registered holder of this Agreement. Warrantholder’s initial address, for purposes of such registry, is set forth below Warrantholder’s signature on this Agreement. Warrantholder may change such address by giving written notice of such changed address to the Company.

The Exercise Price and the number of shares of Common Stock purchasable hereunder are subject to adjustment, as follows:

(a) Merger Event. If at any time there shall be Merger Event, then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of this Agreement, the number of shares of common stock or other securities or property of the successor corporation resulting from such Merger Event that would have been issuable if Warrantholder had exercised this Agreement immediately prior to the effective date of the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company’s Board of Directors) shall be made in the application of the provisions of this Agreement with respect to the rights and interests of the Warrantholder after the Merger Event to the end that the provisions of this Agreement (including adjustments of the Exercise Price and number of shares of Common Stock purchasable) shall be applicable in their entirety, and to the greatest extent possible. Without limiting the foregoing, in connection with any Merger Event, upon the closing thereof, the successor or surviving entity shall assume the obligations of this Agreement. In connection with a Merger Event and upon Warrantholder’s written election to the Company, the Company shall cause this Agreement to be exchanged for the consideration that Warrantholder would have received if Warrantholder chose to exercise its right to have shares issued pursuant to the Net Issuance provisions of this Agreement immediately prior to the effective date of the Merger Event without actually exercising such right, and without acquiring such shares and exchanging such shares for such consideration.

(b) Reclassification of Shares. Except as set forth in Section 8(a), if the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Agreement exist into the same or a different number of securities of any other class or classes, this Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Agreement immediately prior to the effective date of such combination, reclassification, exchange, subdivision or other change.

(c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Common Stock, (i) in the case of a subdivision, the Exercise Price shall be proportionately decreased, and the number of shares of Common Stock issuable upon exercise of this Agreement shall be proportionately increased, or (ii) in the case of a combination, the Exercise Price shall be proportionately increased, and the number of shares of Common Stock issuable upon the exercise of this Agreement shall be proportionately decreased.

(d) Stock Dividends. If the Company at any time while this Agreement is outstanding and unexpired shall pay a dividend with respect to the Common Stock payable in Common Stock, then the Exercise Price shall be adjusted, from and after the date of determination of stockholders entitled to receive such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such date of determination by a fraction (A) the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such dividend or distribution, and (B) the denominator of which shall be the total number of shares of Common Stock outstanding immediately after such dividend or distribution.

(e) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock in cash, property or securities other than Common Stock; (ii) the Company shall offer for subscription prorata to the holders of any class of its Common Stock or other convertible stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) the Company shall sell, lease, license or otherwise transfer all or substantially all of its assets; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least thirty (30) days’ prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Common Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; and (B) in the case of any such Merger Event, sale, lease, license or other transfer of all or substantially all assets, dissolution, liquidation or winding up, at least thirty (30) days’ prior written notice of the date when the same shall take place (and specifying the date on which the holders of Common Stock shall be entitled to exchange their Common Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up).

Each such written notice (or a subsequent notice given at least five (5) days prior to the Merger Event, dissolution, liquidation, or winding up) shall set forth, in reasonable detail, (i) the event requiring the notice, and (ii) if any adjustment is required to be made, (A) the amount of such adjustment, (B) the method by which such adjustment was calculated, (C) the adjusted Exercise Price (if the Exercise Price has been adjusted), and (D) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, or by reputable overnight courier with all charges prepaid, addressed to the Warrantholder at the address for Warrantholder set forth in the registry referred to in Section 7.

(f) Timely Notice. Failure to timely provide such notice required by subsection (e) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. For purposes of this subsection (f), and notwithstanding anything to the contrary in Section 13(g), the notice period shall begin on the date the Warrantholder actually receives a written notice containing all the information required to be provided in such subsection (e).

(a) Reservation of Common Stock. The Common Stock issuable upon exercise of the Warrantholder’s rights has been or will be duly and validly reserved and, when issued in accordance with the provisions of this Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, that the Common Stock issuable pursuant to this Agreement may be subject to restrictions on transfer under state and/or federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and current bylaws. The issuance of certificates for shares of Common Stock upon exercise of this Agreement shall be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Common Stock; provided, that the Company shall not be required to pay any tax which may be payable in respect of any transfer and the issuance and delivery of any certificate in a name other than that of the Warrantholder.

(b) Due Authority. The execution and delivery by the Company of this Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Common Stock, have been duly authorized by all necessary corporate action on the part of the Company. This Agreement constitutes a legal, valid and binding agreement of the Company, enforceable in accordance with its terms.

(c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Agreement, except for the filing of notices pursuant to Regulation D under the Act and any filing required by applicable state securities law or any exchange on which shares of the Company’s stock shall be traded, which filings will be effective by the time required thereby.

(d) Issued Securities. All issued and outstanding shares of the Company’s securities have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of the Company’s securities were issued in full compliance with all federal and state securities laws.

(e) Other Commitments to Register Securities. Except for the Registration Rights Agreement between the Company and certain investors dated as of March 31, 2005, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the Act any of its presently outstanding securities or any of its securities which may hereafter be issued.

(f) Exempt Transaction. Subject to the accuracy of the Warrantholder’s representations in Section 10, the issuance of the Common Stock upon exercise of this Agreement constitutes a transaction exempt from (i) the registration requirements of Section 5 of the Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws.

(g) Compliance with Rule 144. If the Warrantholder proposes to sell Common Stock issuable upon the exercise of this Agreement, or the Common Stock into which it is convertible, in compliance with Rule 144 promulgated by the SEC, then, upon Warrantholder’s written request to the Company, the Company shall furnish to the Warrantholder, within ten days after receipt of such request, a written statement confirming the Company’s compliance with the filing requirements of the SEC as set forth in such Rule, as such Rule may be amended from time to time.

(h) Information Rights. If at any time during the term of this Agreement the Company is not subject to reporting requirements under either Section 13(d) or Section 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company shall provide to the Warrantholder annual, audited financial statements of the Company within sixty (60) days after the end of each fiscal year, and interim unaudited financial statements within thirty (30) days after the end of each fiscal quarter.

(i) Trading Based on Non-Public Information. Warrantholder acknowledges that as a result of its position as noteholder under the Note it has or may receive non-public information about the Company which is or may be material. Accordingly, Warrantholder agrees that it will not unlawfully exercise or transfer all or any part of this Agreement or the securities purchasable hereunder based on any material non-public information.

This Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder:

(a) Investment Purpose. The rights hereunder and the securities that may be acquired on their exercise have been acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption.

(b) Private Issue. The Warrantholder understands (i) that the Common Stock issuable upon exercise of this Agreement is not registered under the Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company’s reliance on such exemption is predicated on the representations set forth in this Section 10.

(c) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment.

(d) Risk of No Registration. The Warrantholder understands that if a registration statement covering the securities under the Act is not in effect when it desires to sell (i) the rights to purchase Common Stock pursuant to this Agreement or (ii) the Common Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period. The Warrantholder also understands that any sale of (A) its rights hereunder to purchase Common Stock or (B) Common Stock issued or issuable hereunder which might be made by it in reliance upon Rule 144 under the Act may be made only in accordance with the terms and conditions of that Rule.

(e) Accredited Investor. Warrantholder is an “accredited investor” within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect.

Subject to compliance with applicable federal and state securities laws, this Agreement and all rights hereunder are transferable, in whole or in part, without charge to the holder hereof (except for transfer taxes) upon surrender of this Agreement properly endorsed. Each taker and holder of this Agreement, by taking or holding the same, consents and agrees that this Agreement, when endorsed in blank, shall be deemed negotiable, and that the holder hereof, when this Agreement shall have been so endorsed and its transfer recorded on the Company’s books, shall be treated by the Company and all other persons dealing with this Agreement as the absolute owner hereof for any purpose and as the person entitled to exercise the rights represented by this Agreement. The transfer of this Agreement shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the “Transfer Notice”), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. Until the Company receives such Transfer Notice, the Company may treat the registered owner hereof as the owner for all purposes. Notwithstanding the foregoing, subject to compliance with applicable federal and state securities laws, this Agreement may be assigned at any time on the same terms and conditions as the Note.

(a) The Company shall prepare, and, as soon as possible but in no event later than the date that is 60 days after the date of this Agreement, file with the SEC a Registration Statement on Form S-3 (or if Form S-3 is unavailable then on a Form S-1 or other form reasonably acceptable to Warrantholder) for an offering to be made on a continuous basis pursuant to Rule 415 of the Act, covering the resale of all of the Warrant Shares. The Company shall use its best efforts to have the Registration Statement declared effective by the SEC as soon as possible, but in no event later than four months after the date hereof. The Company shall pay all costs and expenses related to the registration of the Warrant Shares, including without limitation the reasonable fees and expenses of legal counsel to the Warrantholder, not to exceed $5,000. The Company shall use its best efforts to keep such registration statement continuously effective under the Act until the earlier of (A) the date on which all of the Warrant Shares have been sold, and (B) the date on which all of the Warrant Shares may be sold without registration pursuant to Rule 144(k) under the Exchange Act (the “Registration Period”). The Company shall promptly prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such Registration Statement and any prospectus used in connection therewith, as may be necessary to keep such Registration Statement effective at all times until the expiration of the Registration Period.

(b) The Company shall, not less than three (3) business days prior to the filing of the Registration Statement or any related prospectus or any amendment or supplement thereto, (i) furnish to the Warrantholder or any holder under this Agreement copies of the Registration Statement or prospectus proposed to be filed, which documents will be subject to the review of the Warrantholder or any holder under this Agreement, and (ii) cause its officers and directors, counsel and independent certified public accountants to respond to such inquiries as shall be necessary, in the reasonable opinion of respective counsel to conduct a reasonable investigation within the meaning of the Act. Furthermore, the Company shall advise the Warrantholder or any holder under this Agreement, within two (2) business days: (x) after it shall receive notice or obtain knowledge of the issuance of any stop order by the SEC delaying or suspending the effectiveness of the Registration Statement or of the initiation or threat of any proceeding for that purpose, or any other order issued by any state securities commission or other regulatory authority suspending the qualification or exemption from qualification of any of the Warrant Shares under state securities or “blue sky” laws; and it will promptly use its best efforts to prevent the issuance of any stop order or other order or to obtain its withdrawal at the earliest possible moment if such stop order or other order should be issued; and (y) when the prospectus or any prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment thereto, when the same has become effective.

(c) If, at any time when the Warrant Shares have not been registered under this Agreement, the Company proposes to register any of its Common Stock under the Act, whether as a result of a primary or secondary offering of Common Stock or pursuant to registration rights granted to holders of other securities of the Company (but excluding in all cases any registrations to be effected on Forms S-4 or S-8 or other applicable successor Forms), the Company shall, each such time, give to the Warrantholder written notice of its intent to do so. Upon the written request of the Warrantholder given within 20 days after the giving of any such notice by the Company, the Company shall use reasonable efforts to cause to be included in such registration the Warrant Shares of such selling Investor, to the extent requested to be registered; provided that (i) the number of Warrant Shares proposed to be sold by the Warrantholder is equal to at least seventy-five percent (75%) of the total number of Warrant Shares then held by the Warrantholder, (ii) the Warrantholder agrees to sell those of its Warrant Shares to be included in such registration in the same manner and on the same terms and conditions as the other shares of Common Stock which the Company proposes to register, and (iii) if the registration is to include shares of Common Stock to be sold for the account of the Company or any party exercising demand registration rights pursuant to any other agreement with the Company, the proposed managing underwriter does not advise the Company that in its opinion the inclusion of the Warrant Shares (without any reduction in the number of shares to be sold for the account of the Company or such party exercising demand registration rights) is likely to affect materially and adversely the success of the offering or the price that would be received for any shares of Common Stock offered, in which case the rights of the Warrantholder shall be as provided below. If such a registration involves an underwritten offering and the managing underwriter shall advise the Company in writing that, in its opinion, the number of shares of Common Stock requested by the Warrantholder to be included in such registration is likely to affect materially and adversely the success of the offering or the price that would be received for any shares of Common Stock offered in such offering, then, notwithstanding anything herein to the contrary, the Company shall be required to include in such registration only the number of shares of Common Stock which the Company is so advised can be sold in such offering, (i) first, the number of shares of Common Stock proposed to be included in such registration for the account of the Company and/or any stockholders of the Company (other than the Warrantholder) that have exercised demand registration rights, in accordance with the priorities, if any, then existing among the Company and/or such stockholders of the Company with registration rights (other than the Warrantholder), and (ii) second, the shares of Common Stock requested to be included in such registration by all other stockholders of the Company who have piggyback registration rights (including, without limitation, the Warrantholder), pro rata among such other stockholders (including, without limitation, the Warrantholder) on the basis of the number of shares of Common Stock that each of them requested to be included in such registration. In connection with any offering involving an underwriting of shares, the Company shall not be required hereunder or otherwise to include the Warrant Shares therein unless the Warrantholder accepts and agrees to the terms of the underwriting, which shall be reasonable and customary, as agreed upon between the Company and the underwriters selected by the Company.

(i) The Company agrees to indemnify and hold harmless each Holder Indemnitee (as defined below) from and against any losses, claims, damages, liabilities or expenses to which such Holder Indemnitee may become subject (under the Act or otherwise) insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise out of, or are based upon (A) any untrue statement of a material fact contained in the Registration Statement or prospectus, (B) any failure by the Company to fulfill any undertaking included in the Registration Statement, (C) any breach of any representation, warranty or covenant made by the Company in this Agreement and (D) any violation or alleged violation of the Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Warrant Shares, and the Company will promptly reimburse such Holder Indemnitee for any reasonable legal or other expenses incurred in investigating, defending or preparing to defend, settling, compromising or paying any such action, proceeding or claim; provided, however, that the Company shall not be liable in any such case to the extent that such loss, claim, damage, liability or expense arises solely out of, or is based solely upon, an untrue statement made in such Registration Statement in reliance upon and in conformity with written information furnished to the Company by such Holder Indemnitee specifically for use in preparation of the Registration Statement.

(ii) The Warrantholder or any holder under this Agreement agrees (severally and not jointly with any other holder under this Agreement) to indemnify and hold harmless the Company (and each person, if any, who controls the Company within the meaning of Section 15 of the Act, each officer of the Company who signs the Registration Statement and each director of the Company) from and against any losses, claims, damages, liabilities or expenses to which the Company (or any such officer, director or controlling person) may become subject (under the Act or otherwise), insofar as such losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) arise solely out of, or are based solely upon, any untrue statement of a material fact contained in the Registration Statement, but only if and to the extent that such untrue statement was made in reliance upon and in conformity with written information furnished by the Warrantholder or any holder under this Agreement specifically for use in preparation of the Registration Statement (provided, however, that the Warrantholder or any holder under this Agreement shall not be liable in any such case for any untrue statement in any Registration Statement or prospectus if such statement has been corrected in writing by the Warrantholder or any holder under this Agreement and delivered to the Company at least three business days prior to the pertinent sale or sales by the Warrantholder or any holder under this Agreement). Notwithstanding the foregoing, the aggregate liability of each of the Warrantholder and any holder under this Agreement pursuant to this subsection (ii) shall be limited to the net amount received by the Warrantholder or any holder under this Agreement from the sale of the Warrant Shares.

(iii) Promptly after receipt by any indemnified person of a notice of a claim or the beginning of any action in respect of which indemnity is to be sought against an indemnifying person pursuant to this Section 12(d), such indemnified person shall notify the indemnifying person in writing of such claim or of the commencement of such action, but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party under this Section 12(d) (except to the extent that such omission materially and adversely affects the indemnifying party’s ability to defend such action) or from any liability otherwise than under this Section 12(d). Subject to the provisions hereinafter stated, in case any such action shall be brought against an indemnified person, the indemnifying person shall be entitled to participate therein, and, to the extent that it shall elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to such indemnified person. After notice from the indemnifying person to such indemnified person of its election to assume the defense thereof, such indemnifying person shall not be liable to such indemnified person for any legal expenses subsequently incurred by such indemnified person in connection with the defense thereof, provided however, that if there exists or shall exist a conflict of interest that would make it inappropriate, in the opinion of counsel to the indemnifying person, for the same counsel to represent both the indemnified person and such indemnifying person or any affiliate or associate thereof, the indemnified person shall be entitled to retain its own counsel at the expense of such indemnifying person; provided, however, that no indemnifying person shall be responsible for the fees and expenses of more than one separate counsel (together with appropriate local counsel) for all indemnified parties. In no event shall any indemnifying person be liable in respect of any amounts paid in settlement of any action unless the indemnifying person shall have approved the terms of such settlement; provided, that such consent shall not be unreasonably withheld. No indemnifying person shall, without the prior written consent of the indemnified person, effect any settlement of any pending or threatened proceeding in respect of which any indemnified person is or could have been a party and indemnification could have been sought hereunder by such indemnified person, unless such settlement includes an unconditional release of such indemnified person from all liability on claims that are the subject matter of such proceeding.

(iv) If the indemnification provided for in this Section 12(d) is unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, claims, damages, liabilities or expenses (or actions or proceedings in respect thereof) referred to herein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and the Warrantholder or any holder under this Agreement on the other in connection with the statements or omissions or other matters which resulted in such losses, claims, damages, liabilities or expenses (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, in the case of an untrue statement, whether the untrue statement relates to information supplied by the Company on the one hand or the Warrantholder or any holder under this Agreement on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement. The Company and the Warrantholder and any holder under this Agreement agree that it would not be just and equitable if contribution pursuant to this subsection (iv) were determined by pro rata allocation (even if the Warrantholder or any holder under this Agreement were treated as one entity for such purpose) or by any other method of allocation which does not take into account the equitable considerations referred to above in this subsection (iv). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (iv) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (iv), the Warrantholder or any holder under this Agreement shall not be required to contribute any amount in excess of the net amount received by the Warrantholder or any holder under this Agreement from the sale of the Warrant Shares. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The obligations in this subsection of the Warrantholder or any holder under this Agreement to contribute are several in proportion to the sales of Warrant Shares to which such loss relates and not joint with any other holder under this Agreement.

(v) For purposes of this Section 12(d), the term “Holder Indemnitee” shall include the Warrantholder or any holder under this Agreement, its officers, directors, employees, partners, agents and any person controlling the Warrantholder or any holder under this Agreement; the term “Registration Statement” shall include any final prospectus, exhibit, supplement or amendment included in or relating to the Registration Statement; and the term “untrue statement” shall include (A) any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the Registration Statement a material fact required to be stated therein or necessary to make the statements therein not misleading and (B) any untrue statement or alleged untrue statement, or any omission or alleged omission to state in the prospectus a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(vi) Notwithstanding anything in this Agreement to the contrary, if the Company shall furnish to the Warrantholder a certificate signed by the President or Chief Executive Officer of the Company stating that the Board has made the good faith determination either (A) any event or circumstance has occurred or will occur, which upon the advice of counsel, necessitates the making of any changes in any Registration Statement or related prospectus, or any document incorporated or deemed to be incorporated therein by reference, so that in the case of the Registration Statement, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the prospectus, it will not contain any untrue statement of a material fact or any omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or (B) (i) that continued use by the Warrantholder of the Registration Statement for purposes of effecting offers or sales of Warrant Shares pursuant thereto would require, under the Act, premature disclosure in the Registration Statement (or the prospectus relating thereto) of material, nonpublic information concerning the Company, its business or prospects or any proposed material transaction involving the Company, (ii) that such premature disclosure would be materially adverse to the Company, its business or prospects or any such proposed material transaction or would make the successful consummation by the Company of any such material transaction significantly less likely and (iii) that it is therefore essential to suspend the use by the Warrantholder of such Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Warrant Shares pursuant thereto, then the right of the Investors to use the Registration Statement (and the prospectus relating thereto) for purposes of effecting offers or sales of Warrant Shares pursuant thereto shall be suspended for a period (the “Suspension Period”) of not more than 30 days after delivery by the Company of the certificate referred to above in this Section 12; provided that the Company shall be entitled to no more than two such Suspension Periods during the twelve (12) month period commencing on the date hereof and during each subsequent twelve (12) month periods. Notwithstanding the foregoing, to the extent that the Company is not eligible to use Form S-3 and has filed a registration statement which has been declared effective by the SEC, the Company shall be entitled to any number of Earnings Suspensions (as hereinafter defined) during any twelve (12) month period provided that taken together, such Earnings Suspensions do not result in a Suspension Period of longer than an aggregate of 45 days in any twelve (12) month period. “Earnings Suspension” shall mean, at any time when the Company is not eligible to use Form S-3 or similar form of registration statement, a Suspension Period relating to an announcement of earnings by the Company at any time from the end of a fiscal period and prior to its announcement of periodic financial results of the Company for such period and through the date on which a post-effective amendment to such registration statement has been declared effective by the SEC in connection with the financial results for such period. During the Suspension Period, the Warrantholder shall not offer or sell, or attempt to offer or sell, any Warrant Shares pursuant to or in reliance upon the Registration Statement (or the prospectus relating thereto). The Company shall use commercially reasonable efforts to terminate any Suspension Period as promptly as practicable.

(a) Effective Date. The provisions of this Agreement shall be construed and shall be given effect in all respects as of the date hereof. This Agreement shall be binding upon any successors or assigns of the Company.

(b) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law. The parties hereto agree that the terms of this Agreement shall be specifically enforceable by either party hereto notwithstanding the availability of an adequate remedy at law. If either party institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense that the complaining party has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

(c) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Agreement, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment.

(d) Additional Documents. The Company, upon execution of this Agreement, shall provide the Warrantholder with certified resolutions with respect to the representations, warranties and covenants set forth in Sections 9(a) through 9(d), 9(f) and 9(g). The Company shall also supply such other documents as the Warrantholder may from time to time reasonably request.

(e) Attorney’s Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to reasonable attorneys’ fees and reasonable expenses and all costs of proceedings incurred in enforcing this Agreement. For the purposes of this Section 13(e), attorneys’ fees shall include without limitation fees incurred in connection with the following: (i) contempt proceedings; (ii) discovery; (iii) any motion, proceeding or other activity of any kind in connection with an insolvency proceeding; (iv) garnishment, levy, and debtor and third party examinations; and (v) post-judgment motions and proceedings of any kind, including without limitation any activity taken to collect or enforce any judgment.

(f) Severability. In the event any one or more of the provisions of this Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision.

(g) Notices. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication that is required, contemplated, or permitted under this Agreement or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the first business day after transmission by facsimile or hand delivery or deposit with an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States mails, with proper first class postage prepaid, and shall be addressed to the party to be notified as follows:





If to Warrantholder:

		Broadwood Partners, L.P. c/o Broadwood Capital, Inc. 724 Fifth Avenue 9^th Floor New York, NY 10019 Telephone: (212) 508-5753 Facsimile: (212) 508-5756

With a copy to:


		Seward & Kissel LLP Attention: John Tavss, Esq. One Battery Park Plaza New York, NY 10004 Telephone: (212) 574-1300 Facsimile: (212) 480-8421

If to the Company

		STAAR Surgical Company 1911 Walker Ave. Monrovia, CA 91016 Attention: Chief Financial Officer Telephone: (626) 303-7902 Facsimile: (626) 358-3049

(h) Entire Agreement; Amendments. This Agreement and the Note constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersede and replace in their entirety any prior proposals, term sheets, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof. None of the terms of this Agreement may be amended except by an instrument executed by each of the parties hereto.

(i) Headings. The various headings in this Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Agreement or any provisions hereof.

(j) Advice of Counsel. Each of the parties represents to each other party hereto that it has discussed (or had an opportunity to discuss) with its counsel this Agreement and, specifically, the provisions of Sections 13(n), 13(o) and 13(p).

(k) No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

(l) No Waiver. No omission or delay by Warrantholder at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by the Company at any time designated, shall be a waiver of any such right or remedy to which Warrantholder is entitled, nor shall it in any way affect the right of Warrantholder to enforce such provisions thereafter.

(m) Survival. All agreements, representations and warranties contained in this Agreement or in any document delivered pursuant hereto shall be for the benefit of the parties and shall survive the execution and delivery of this Agreement and the expiration or other termination of this Agreement.

(n) Governing Law. This Agreement has been negotiated and delivered to Warrantholder in the State of New York, and shall have been accepted by Warrantholder in the State of New York. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

(o) Consent to Jurisdiction and Venue. The Company hereby expressly and irrevocably submits to the exclusive jurisdiction of the courts of the state of New York and of the United States District Court of the Southern District of New York for the purpose of any litigation arising hereunder. The Company further irrevocably consents to the service of process by registered mail, postage prepaid, or by personal service within or without the state of New York. The Company hereby expressly and irrevocably waives, to the fullest extent permitted by law, any objection which it may have or hereafter may have to the laying of venue of any such litigation brought in any such court referred to above and any claim that any such litigation has been brought in an inconvenient forum.

(p) Mutual Waiver of Jury Trial. THE WARRANTHOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE WARRANTHOLDER OR THE COMPANY. THE COMPANY ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE WARRANTHOLDER TO MAKE THE LOAN EVIDENCED BY THE NOTE.

(q) Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

(r) Specific Performance. The parties hereto hereby declare that it is impossible to measure in money the damages which will accrue to the other by reason of any failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable by any injured party to this Agreement. If an injured party to this Agreement institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that the other has an adequate remedy at law, and such person shall not offer in any such action or proceeding the claim or defense that such remedy at law exists.

IN WITNESS WHEREOF, each of the parties hereto has caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the date first set forth above.


COMPANY:		STAAR SURGICAL COMPANY

		By:

		Name: Deborah Andrews Title: Vice President, Chief Financial Officer

WARRANTHOLDER:		BROADWOOD PARTNERS, L.P.

		By:

		Name: Neal C. Bradsher Title: President, Broadwood Capital, Inc., General Partner of Broadwood Partners, L.P.

(1) The undersigned Warrantholder hereby elects to purchase shares of the Common Stock of the Company pursuant to the terms of the Warrant Agreement dated March 21, 2007 (the “Agreement”) between the Company and the Warrantholder, and [CASH PAYMENT: tenders herewith payment of the Purchase Price in full, together with all applicable transfer taxes, if any.] [RELEASE OF INDEBTEDNESS: elects release indebtedness under the Note in the amount of the Purchase Price under the pursuant to Section 3 of the Agreement].

Warrant Shares are to be issued electronically using the Depositary Trust Company Fast Automated Securities Transfer program to account number . The Broker’s Name is , and it will initiate such transaction on [date];

Capitalized terms used but not defined herein have the same meanings ascribed to them in the Warrant Agreement.

The undersigned, STAAR Surgical Company, hereby acknowledges receipt of the “Notice of Exercise” from Broadwood Partners, L.P. to purchase [ ] shares of the Common Stock of STAAR Surgical Company, pursuant to the terms of the Agreement, and further acknowledges that upon such exercise, the Agreement remains in full force and effect as to shares of Common Stock.

Capitalized terms used but not defined herein have the same meanings ascribed to them in the Warrant Agreement.

(To transfer or assign the foregoing Agreement execute this form and supply required information. Do not use this form to purchase shares.)

FOR VALUE RECEIVED, the foregoing Agreement and all rights evidenced thereby are hereby transferred and assigned to

NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Agreement.

Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the STAAR Surgical fourth quarter 2006 results conference call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. If you have a question, please press the star followed by the 1 on your touchtone phone. If you’d like to withdraw your question, please press the star followed by the 2. If you’re using speaker equipment please note that you do need to lift the handset prior to making your selection.

As a reminder this conference is being recorded today, Wednesday the 14th of March, 2007. I’d now like to turn the conference over to Mr. Doug Sherk of the EVC Group. Please go ahead.

Thank you, operator. Good afternoon, everyone. Thank you, for joining us this afternoon, for the STAAR Surgical conference call to review the financial results for the fourth quarter and the full year of 2006 which ended on December 29th, 2006.

The news release announcing the third quarter results crossed the wire this afternoon after the market closed. If you haven’t received a copy of the release and would like one please call our office at 415-896-6820 and we’ll get one to you immediately.

In addition, we want to alert you that this afternoon we have filed an 8K that summarizes the findings of our completed investigation of the irregularities at our subsidiary Domilens and certainly want to make sure that you’re aware of the — that filing this afternoon.

Additionally, we’ve arranged for a taped replay of this call which may be accessed by phone. The replay will become available approximately one hour after the call’s conclusion and remain available for seven days. The dial-in number to access the replay is 800-405-2236 or for international callers it’s 303-590-3000. Both numbers will need a pass code of 11081256 followed by the pound sign.

This call is being broadcast live and an archived replay will also be available. To access the webcast go to STAAR’s website at www.staar.com

Before we get started, during the course of this conference call the company will make projections or other forward-looking statements regarding future events including statements about the sales and the company’s beliefs about its revenues, net earnings, and prospects for 2007.

We wish to caution that you all statements that are not statements of historical fact are forward-looking statements including any projections of earnings, revenues, sales, cash, or other financial items. Any statements of the plans, strategies, and objectives of management for future operations, any statements regarding expectations for success of the ICL or other products in the U.S. or international markets.

Any statements concerning proposed new products and government approval of new products, services, or developments, statements of expectations regarding pending transactions, any statements regarding future economic conditions or performance, statements about the success of replacement of the management at Domilens, statements of belief and any statements of assumption underlying any of the foregoing. These statements are based on expectations and assumptions as of the date of this conference call and are subject to numerous risks and uncertainties which could cause actual results to differ materially from those described in the forward-looking statement.

The risks and uncertainties include our limited capital resources and limited access to financing, our ability to overcome past negative publicity resulting from warning letters and other correspondence from the FDA Office of Compliance, the willingness of surgeons and patients to adopt a new product and procedure, and our ability to successfully market the ICL in the U.S. while overcoming the foregoing challenges.

Our financial condition can be adversely affected by general economic conditions and other factors beyond our control including those detailed from time to time in our reports filed with the Securities and Exchange Commission. STAAR assumes no obligation to update these forward-looking statements to reflect future events or actual outcomes and does not intend to do so.

Now let’s turn the call over to David Bailey, President and Chief Executive Officer of STAAR.

Thank you, Doug and thank you all for joining us on our conference call to review the fourth quarter results from the year.

We’re pleased with the progress that our full-year results underscore and we are also very excited about the potential success we believe we can achieve during 2007.

First, I’d like to summarize the positives of where STAAR is today. Sales are up nicely year on year. The German situation is resolved with no expected restatement and, as I’ll talk about, a recent increased sales number. Worldwide ICL sales are growing nicely and we intend to be persistent in penetrating the U.S. market. Cataract sales trends were up in the fourth quarter.

Overall we have an excellent product portfolio with clear competitive advantages, and in 2007 we plan to further improve this portfolio. I’d like to give you some details. I’d say the company is in the early stages of a successful execution phase as evidenced by our accelerating top line growth during 2006 and the fourth quarter. The year-over-year comparisons shows top line sales growth of 10 percent, with the growth accelerating since the second quarter, culminating with Q4 growth of 26 percent year over year.

The fourth quarter was the highest —sorry, was the second highest quarterly revenue level in the company’s 25-year history. Of particular note is the refractive trend in international where over the last three years we have achieved annual growth rates greater than 35 percent.

Throughout 2006 we saw significant acceleration of this trend and we achieved growth of 50 percent versus 2005 and fourth quarter growth of 106 percent versus Q4, ‘05. With FDA approval of the Visian ICL, our international sales of both the ICL and TICL have accelerated. We are also executing our strategy to regain healthy market share within our cataract business.

In fact, during the fourth quarter we grew worldwide cataract sales by 6 percent year over year and achieved the highest quarterly revenue since the second quarter of ‘05. Part of this growth is attributable to the execution of our turnaround strategy in the U.S. cataract market.

Before I discuss these positives and emerging trends further, let me give you a quick update on the situation in Germany. I’m pleased to report that we have closed the investigation of our German subsidiary Domilens and there were no additional surprises.

After a full investigation, we have determined that no adjustments are required to historical financial results. We have executed the first step in our action plan by placing our successful international manager, who is a German national, in charge of the subsidiary. The transition appears to be going well.

Our sales during the first ten weeks of 2007 are up 15 percent over the comparable year-ago period. Domilens is essentially a cataract business that was adversely affected by difficult market conditions during 2006. Strikes by doctors we referenced on earlier calls. As a result, our total international cataract business was down 5 percent in 2006 versus 2005. Although it’s still early days in 2007, we are seeing this trend reverse and being replaced by overall cataract growth in ‘07 versus prior-year period.

Turning to our worldwide ICL business, we note that international refractive sales continue to benefit from the solid groundwork we laid over the last three years to build awareness and demand for the technologies. The perception in the positioning today of our technology is very different from where it was a few years ago.

Through solid surgeon retraining and distributor management we have built the business to where we are taking market share from other phakic lenses and increasing our penetration rate to well-established LASIK markets such as Korea and Spain. In both of these countries we estimate our market share as a percentage of LASIK has doubled over last year.

A key driver for this success is the positioning we have established for the technology in the minds of the refractive surgeon. In the international markets, users view the ICL as a complementary technology to LASIK to be used where corneal-based procedures are for less certainty of outcome or more risk.

In such situations our highly penetrated users don’t offer LASIK or PRK as an alternative for those patients. Our goal is to build similar mind share in the U.S., and as I will discuss in more detail in a minute, we believe this goal is achievable. The limits of LASIK concept is being well embraced and is driving ICL procedure volumes and overall growth of refractive procedures in the surgeons’ practices.

By choosing the right technologies for the patient, the surgeon will achieve better outcomes and on average, happier patients. For STAAR it has resulted in some international surgeons having individual implant for LASIK ratios of up to 25 percent and on average we are seeing 10 to 15 percent for a surgeon being the norm. More importantly, once this kind of position is established the business grows organically and consistently. This is what we have seen over the last few years and we are confident this will continue going forward. So far in 2007 we are seeing double-digit growth in our international refractive business.

Looking at our U.S. business, we have successfully begun to turnaround our total domestic business with sales growth 19 percent in 2006. Importantly, we improved the performance of our domestic cataract franchise. While still down, we achieved a much reduced decline in year-over-year cataract sales of 5 percent and actually achieved year-over-year growth of 4 percent in Q4.

New product introductions during the course of this year in cataract along with a continued strengthening of the sales and marketing organization will, we believe, position us for growth in cataract over the coming year. We are moving quickly to exploit the opportunities that are opening up in the U.S. market. To do this we recently split our sales and marketing organization into two groups.

This is a positive development and reflects our move into execution mode in the U.S. As we add resource to the selling effort, we must make sure this provides an early return on the investment and, of course, management and direction in the sales force is the key to achieving this objective.

This split in sales and marketing will help with this kind — this focus along with a revised commission structure will, we believe, encourage extra activities in those areas of greatest opportunity. Once again we have linked refractive and cataract commission, this time with the aim of rewarding those representatives with a director independent to convert new refractive customers to our cataract products.

As we recently announced, CMS, that’s the Center for Medicare and Medicaid Services, have now changed the reimbursement policy for Toric IOLs that will allow doctors to charge a premium for this product. Historically, reimbursement levels for cataract surgery have been declining and are anticipated to decline further by up to 25 percent over the next three to four years. The new CMS ruling has the potential to make cataract surgery involving the use of a Toric IOL more profitable for doctors while providing better patient outcomes.

We believe this is a big positive for STAAR and will support our continued rebound in the U.S. market. Within the U.S. franchise, we were disappointed with the delay in the approval of timeline for the TICL and we’re working hard in preparing our response to the questions raised.

We have continued to build the market for the ICL in the U.S. We believe the U.S. market is significant and that all the time it will follow the trend in international markets once the complementary position that I have discussed is adopted by the large U.S. refractive centers. At the moment and as outlined in our most recent investor presentation the current physician mindset in the U.S. is one of, well I cannot do any of the refractive corneal base procedure.

It is our challenge to replicate what we’ve done in international — in international and deliver a complementary positioning where the center delivers the right procedure for the patient by adopting an uncompromising demarcation between the two technologies. This will take time, quite frankly, longer than we initially estimated. To this end we are focused on the following key activities in the U.S. market.

Expert and user meetings, our next one is at ASCRS in late April and we have all the 100 surgeons at different skill levels signed up for a full one-and-a-half day meeting. We will do lots of clinical comparisons, conference presentations and peer review journals, articles, comparing ICL outcomes to outcomes from corneal based procedures.

We have a continued focus on practiced development, proctoring and training additional high volume surgeons to help champion our cause, and we have focused training with sales reps whether they are independent or direct and we’re hiring new sales reps. We’re also adding refractive account managers to facilitate volume increases in ICL accounts.

I think it’s important to keep in mind that in medicine all gold standards tend to eventually fall in the face of new superior technology. We saw this with RK, then with PRK. Now LASIK is being limited as a result of the shift back towards PRK resulting in fewer patient referrals due to less early satisfaction with the procedure.

We believe that over the next few years ophthalmologist’s thinking will shift away from the current emphasis, which is still on LASIK, towards a much broader view of refractive surgery that will be based on what is best for the patient. This process will take time but the data is very much on our side and the views of thought leaders are beginning to align. We have a product with clear sustainable competitive advantages and it’s our job to execute a marketing and sales plan to become that new gold standard.

Our goals over the next two years is to complete the introduction of our new — of our major new products which are based on superior technology both in the U.S. and around the world, to continue the rapid growth that we’ve begun to record over the last couple of quarters, and to continue to improve our profitability so that we achieve the important success milestones of cash flow break even, net income profitability, and then strong operating margins. All of this should be achievable as we continue to rapidly grow the sales of our new high margin products which we believe we can do.

Our release this afternoon provides significant financial detail on the quarter’s progress, so my comments will be limited to do specific highlights of the fourth quarter. We of course would be happy to answer any questions you might have about our financials during the Q&A session.

In nearly all product categories we finished the year with strong growth. During the fourth quarter Visian ICL sales were $3.7 million, an increase of 188 percent compared to the same period of 2005 and up 31 percent sequentially compared with the third quarter. This growth was driven by strong ICL sales in international markets which grew 106 percent to 2.6 million, compared with the same period of 2005.

Fourth quarter year-over-year international growth was nearly double the rate we achieved in the third quarter. During the fourth quarter of 2006 ICL sales represented 24 percent of total sales, compared to 11 percent last year and for the full year, ICL sales represented 22 percent of total sales, compared with 10 percent during 2005.

Overall fourth quarter cataract product sales were $11.4 million, up 7.3 percent compared with last year and up 12.3 percent compared with the third quarter of 2006. Fourth quarter total cataract sales reached the highest quarterly level since the second quarter of 2005. These strong sales numbers were driven by growth in both U.S. and international markets.

In the U.S. market, cataract sales were up 6 percent compared with the fourth quarter of last year and we believe our new product introductions, as well as the recent CMS ruling and other trends, should allow to us grow U.S. cataract sales in 2007.

In international markets, cataract sales grew 8 percent to $7 million in the fourth quarter compared with last year. Sales were up 17 percent compared with the third quarter. In addition, as Dave mentioned, we strengthened our international team and believe we are positioned for future growth.

Profit margin was 43.2 percent and was impacted by an $807,000 obsolescence charge for certain IOL inventory in anticipation of new product launches in 2007. This represents a 2.6 percentage point decline versus the fourth quarter of 2005.

Excluding the obsolescence charge, which accounted for a 5.3 percentage point decline in our profit margin, our gross profit margin would have been 48.5 percent, a healthy increase over last year and attributable to the increase in sales of our high margin ICLs.

During the fourth quarter we used approximately $435,000 in cash, an 81 percent improvement over the fourth quarter of last year and a slight increase from the $148,000 used during the third quarter. We also improved our cash used in operating activities over the same period last year.

Our international bank debt at the end of the quarter was $1.8 million. There were no borrowings outstanding under the Wells Fargo line of credit. We exited the third quarter with $7.9 million in cash and have $1.4 million available in borrowings under bank and lease lines of credit.

Throughout 2006 our goals were to successfully launch the ICL in the U.S. and achieve continued ICL growth, stop the U.S. cataract decline and invest in new product development, and focus on our compliance organization. I’m pleased that we’ve been able to achieve these objectives throughout 2006 and the initial trend for 2007 was positive.

Looking ahead, our operating cash position and the timing of when we will become cash flow positive continues to be largely dependent upon the global rate of adoption of the ICL and TICL. That having been said, we believe it’s prudent to continue to explore alternatives that would allow us to buffer our current cash position and we continue to do so.

Additionally, I know some of you have asked us about the potential for us to receive a going concern opinion from our auditors. We are currently in the process of completing our own internal analysis regarding this issue and will be submitting our assessment to the auditors as soon as we are completed.

All right, thank you. Ladies and gentlemen, at this time, we will now begin the question-and-answer session. As a reminder, if you have a question, please press the star followed by the 1 on your touchtone phone. If you’d like to withdraw your question, please press the star followed by the 2. If you’re using speaker equipment please note that you will need to lift the handset before making your selection

Our first question comes from Joanne Wuensch with BMO Capital Markets. Please go ahead.

A little sleep deprived, but well. A couple of questions, you mentioned that sequentially in the United States the phakic IOL was — growth was lower in terms of growth rate. Could you expand on that and what do you really think is behind it?

I think I covered this somewhat in the prepared remarks. We’re doing the groundwork in the U.S. as we did in international over the course of the last few years and you’re not seeing the geometric progression in the sense that as we train more doctors the sales are going up, certainly not in the fourth quarter. But I don’t think that’s reflective of a lack of a potential market in the U.S., I think it’s more reflective of the inbuilt inertia in the U.S. system where the practices are geared toward delivering LASIK or PRK. I think it’s a mindset change and we’re putting the building blocks in to transition that mindset.

And, you know, as I said in my remarks I think if you look at international what you see is as those building blocks come together and as the practice adopts the position for ICL which is specific and precise and where patients are not given the alternative but are given the right procedure, then the business starts to grow organically. We are not at that position yet in the U.S. We are at that position in international.

We’re putting the building blocks in place in the U.S., I think the user group meetings are key and as I referenced in the press release, we’ve got a big user group meeting coming up in late April at the ASCRS where we will have experienced and less experienced users. It will replicate what we did in London in September and I came out of that meeting very confident that the surgeons were motivated to use more product and position it appropriately.

And it’s no coincidence that I have the confidence to believe what would happen in the fourth quarter were it an international ICL. It’s going to happen in the U.S. We are putting the building blocks in, and until that time surgeons will, you know, continue to present LASIK as the primary option. We have to change that mindset. It’s execution. Execution takes time.

But is there anything fundamentally — two questions— is there anything fundamentally different between the OUS market and the U.S. market that would make transitioning that experience over? And then the second piece of the question is, is that should we then think about U.S. growth being somewhat choppy over the next several quarters?

To the fundamentally different, you know, the markets are different but fundamentally it mainly affects timelines for adoption. So I don’t think there’s — there’s not a fundamental difference that would lead me to believe that what we’ve seen in international we wouldn’t see in the U.S.

The entrenchment in the U.S. is probably more than it has been in international for the simple reason that doctors have had alternatives in international for longer. And in general they have less high volume centers with less of a big network of referral ODs. So they tend to be smaller centers that can react to change more quickly. But fundamentally I don’t see a reason why what you see in international cannot be replicated.

In terms of choppy, I guess that’s an interesting one. I would say – you know, the key thing is steady. And at some point we’ll see an inflection point which we’ve already seen in a small number of centers. It’s our goal to expand that to a greater number and at that point we will start to move towards a geometric progression as I would think, you know, the more centers you click over into that mode then the business will start to pick up.

I think the key thing is we’re doing all the right things, we’re focused on the selling effort, the execution effort, and the marketing building blocks are in place. We need to change the mindset and user group meetings is one of the key elements for that, Joanne.

Thanks. One last question, and I apologize if I missed it. Where is your thinking now for an FDA panel for the Toric ICL?

You know, it’s very difficult to predict FDA timelines. We are working on the Toric, a continued work in process. We’ve talked about and anticipated approval early next year. I think I would just stay with those comments at the moment.

Good. So just on ICL, just asking the question a little bit differently. Just in terms of training or proctoring, I mean, is that happening at the rate you would like? If not, why and do you think hiring additional proctors might help accelerate ICL sales faster?

The rate of proctoring as we’ve previously reported is a little slower than we originally anticipated, but it’s ongoing. We gave an updated number in the press release, it’s on our website. That continues to go very well.

The key element of resource we feel now is the selling effort around practice development and refractive expertise, building that in the current sales force and adding to it and that’s where we’re focusing the resource on including the user group meetings. So not so much adding additional proctoring results at this point, really focusing on those other building blocks of execution.

And, you know, that’s the key; it’s utilization rates that we are focused on now that we are getting a group of surgeons who have had a good experience with the product. It’s what we’ve done in international and as we’ve focused with the distributors, for example, on putting refractive specialists into the distributor countries, they have driven the usage up in that country and Korea and Spain are two good examples. We’ve got other ones.

They haven’t increased the proctoring rate, what they’ve done is increased the selling effort, especially the selling effort around refractive, and getting the doctors talking at one another around where to use the right technology and where to segment it and that is the thing that drives the utilization up as opposed to just the pure number of proctor doctors. So it’s quality as well as continually adding quantity.

Gotcha. Thanks, Dave. That’s helpful. So if you’re thinking about then how that shapes out in terms of an inflexion point, I mean how long if you, you know, looking in your crystal ball to the extent that you can, I mean, how long does that take — the last comment that you take about actually gaining adoption and traction? I mean how long does that take?

I hate to put an individual timeline on, it varies by practice. It depends on the size of the practice, et cetera. What I do know is that if we focused on execution and continually improving execution and our efficiency of execution, then we’ll shorten whatever timeline it’s going to be. You can clearly see that we are at an inflexion point in international markets and we are working hard to get to the same point in the U.S. Difficult to the put an exact timeline on it, but we are there in international and we are having pleased with that and will continue to build on that.

Yeah, no, international was great, no question. And then just in terms of Domilens, can you just help us, I mean, I saw the 8K, can you help us better understand, how long was the – how long did the accounting assessment or analysis go back and can we now safely say, I mean, that this is completely behind us?

The accounting assessment I guess officially went back to 2001, the period under audit. But we really went back all the way to 1998 when we purchased the company. We didn’t review all the transactions back then but we looked in the areas where we identified issues, we looked in those same areas to see if there was anything else we could identify.

So it was a pretty substantive audit going back from the time we acquired the company and we believe that this is now all behind us and we can move forward in a very positive way.

Okay, perfect. And then two more quick questions. One is just in terms, just in terms of – okay, I’m sorry, so you said that Domilens went back how far, I apologize?

Well, the official audit went back to 2001 but we also went back on our own to 1998 which was the year where — the first year that we had them.

And ‘98, okay, that was the date I did not hear. Thanks. And then just, gross margins were a little bit, you know, were a little bit weak. I understand the obsolescence charge is in there, but, you know, net of that, 48.5 is still less than — or a little weaker than we expected. Can you just help us I guess better understand how to think about gross margins going forward?

Well, gross margins are going to be, you know, dependent on the rate of adoption of the ICL, it’s significantly impacted by the, you know, ICL sales. So as our cost structure is high, because of lower volumes, but as our cataract product sales grow and ICL sales grow, our margins should also improve.

Additionally, you know, we haven’t really mentioned, but we have significant projects underway in our manufacturing operation to improve our gross profit margins, our cost structures and accordingly our gross profit margins. And we should, you know, those projects are rolling out this year and we should start realizing significant benefits in, you know, at the end of this year and next year in gross profits as a result.

Okay, thanks. And then the last comment you made about the potential of going concern issue that you’re, you know, currently still reviewing that and you’re talking about, you know, financing options, can you just help us understand what those are and timelines around that?

You know, we have since day one, I’ve been trying to identify different financing options. When we are in a very difficult cash position, our options were fewer and more onerous and so it’s, you know, kind of something that we continually have to work on, identifying new options, better options, and, you know, nothing really changed.

Yeah, Mark, you know, the other thing I would say is that a lot of this whole discussion is dependent on sales growth. You know, we were very pleased with the Q4 sales growth obviously. The other thing is I gave some flavor during my comments of the trends that we are seeing early ‘07. And a particular one I want to emphasize based on your questions about Domilens. You know, everybody was shocked, all the employees, et cetera. And we were facing a lot of turmoil at that company which had been very stable in terms of sales, down last year as you know because of the problems in Germany.

But what we are seeing is – so our first focus was stability as we did the whole investigation. And, you know, the first part of the year we are seeing that business up about 15 percent in the first quarter versus the similar period ten weeks of last year. And so, you know, as I said in my remarks, I think that’s really helped to show that we’ve executed on that first priority and getting sales growth of that level in one of our bigger subsidiaries is very helpful along with driving sales growth of ICL, et cetera.

So top line sales growth, you know, is one of the key ingredients around any of these discussions and we are pleased with what we’ve seen and we we’re pleased with some of the trends we continue to see and we are focused very much on execution and that helps everything, along with additional options as Deb talked about.

Great, no, we are encouraged as well as. Thanks, Dave. I appreciate you talking our questions.

I was just wondering, one more thing on the going concern, and that is, as you mentioned, really two big things have changed, one you’ve got these growth trends and also the Domilens situation seems to be pretty much now behind. So would it be possible to kind of know when this going concern issue is resolved fairly quickly now?

Deb will have a healthy discussion, we’re constantly having that discussion and when it’s concluded, it’s concluded. But we can’t be presumptuous.

But I will say that I agree with you completely about the positive trends. We’re in a much different position than we’ve been historically when we’ve had these conversations, so, I will leave it at that.

Thanks. And could you comment on what you view to be the most important milestones going forward?

Good question. International — I mean, the continued growth of international ICL. The continued growth of cataract business internationally where we do seem to have a strong platform there. The U.S. turnaround with new product introductions.

Yes. And I stated in the press release that we are on track the launch the aspheric three-piece Collamer lens at the ASCRS meeting, which was one of our milestones. And I think the other thing is the CMS ruling around the Toric lens represents a significant opportunity for us and I made remarks about how we are trying to capitalize on that by encouraging the sales force.

If the cataracts sell, it goes right to the sweet spot of our independent sales force who have good relationships with many of these doctors and many of the doctors are feeling the effects of reduced reimbursement on cataract and are receptive to using a product where they can enhance outcome and charge additional for it.

The new product introductions along with utilizing that CMS ruling are key ingredient to helping us get some modest U.S. growth on US cataract versus a 5 percent or the reduced decline we got last year.

And then the final thing is continuing to put those solid building blocks in for ICL usage with existing doctors. And I’m extremely encouraged with the level of interest we’ve got in the user group meeting. We’ll have a range of users there, some from international, mostly from the United States. And those meetings tend to be exceptionally good at giving surgeons confidence in the procedure, helping them position it in the right place in their practice. So those kind of building blocks we will continue to execute on. I think they are the key things.

And then the last question, you did say that Toric ICL, you really don’t want to go beyond the thinking that it will be early next year as far as getting approved. But I just had a procedural question, could you kind of lay out procedurally how this works? I understand there’s a panel meeting and then is there a period of time for response and then a period of time for decision or how does that work?

In broad-brush strokes we need to reply within a certain timeline with the answer to the questions, then you would — then they have all the questions and then you’d be looking at a panel at some point and then working through the results of the panel. So, I mean, between those data points, anything can happen and that’s why I’m so reluctant to try and predict milestones at the moment. So it’s just work in process whereas and we’re diligently focused on that.

Tyson Halsey with Halsey Advisory and Management. Please go ahead with your question.

Three years ago we had dinner out in California and at the time I asked you what you thought your mission was and you said it was to bring the ICL to market and maximize shareholder value. You know, since then we’ve had some difficulties with the FDA and the ICL getting approved in as timely manner as we wanted and now we are waiting on the ICL and some of the products I have seen slip.

It’s been rather frustrating and I’m not sure how — we generally think of Lamielle as well as Ellee being hired and what their legacy has been. What I am trying to figure out is, is the company not having the skills, does it really need a larger platform? And maybe from a shareholder appreciation standpoint should be sold or can you point to things that you think really demonstrate that you’re really helping to lead the charge and that what we’ve seen over the last three years is not an indication of what we’re going to see going forward in that we are finally going to see some sort of update because of your management skills? Can you try to address that?

We ask ourselves that all the time. I think if you look at — there’s many things I could point as progress but I think the most quantifiable one for our shareholders now is the revenue growth, which was 10 percent up last year, which was back-end loaded in the sense that you saw an acceleration of that.

I think you have seen some very strong growth in some of our product lines. And so I think, in short, the revenue expansion and as you can see, we are investing to focus on that and we’ve got those building blocks. And, you know, within that subset reversing or slowing down the decline in the U.S. in terms of the cataract business and then putting the building blocks in to start to grow that and we have had some delay. We fully accept that but it, as a company, that ends up as my responsibility. But I think I confirmed that the first new product launch in the U.S. is on track to come out at ASCRS and so, you know, we will continue to execute until such time as we get to where I want it to go, I’m undeterred. And I’m sure there is frustration around, equally so here. But that’s not a productive emotion for me to have. I’ve got to drive the company forward until such time that the job is complete.

Ladies and gentlemen, if there are any additional questions at this time, please press the star followed by the 1 now. Again, please do remember if you’re listening via speaker equipment, you do need to lift the handset prior to making that selection

A couple of good quarters. A couple of questions. Deborah, I think you said in your comments the ICL was 22 percent of ‘06 revenue, did I catch that right?

Okay. So quick calculation suggests about $12 million in sales for the ICL versus about 5, which is obviously very nice performance. How does that break down between U.S. and OUS, can you give us some rough parameter of the contribution of both areas?

Well, in other words if it was roughly $12 million for ‘06 how does that break down between U.S. and international?

Right. So you did, you know, you did $4 million in the ICL in the first full year, which is probably below what you hoped for but really a pretty good start overall I would say.

Yeah, I mean, as I said Larry, we probably underestimated the inertia in the U.S. market, but we’re pleased with the building blocks and that was I think – you know, it was below what we thought but in terms of procedures it wasn’t that far off the first year PRK number which was a long time ago but there was only one procedure then.

I think that was about 6,000 units, you know, eyes treated and if you look at our number, you are at 5,000 or something.

Yes. On the Toric, Toric IOL, I’m having trouble trying to get a handle on how important CMS decision is to you. Obviously, it’s going to take average prices from – you know, I’m interested in the number, but I imagine somewhere in $125, $150 area now to $700 or $800. Is that about the right parameters?

No, indications – I mean, it’s going to depend a lot on what Alcon do. The indications I’m getting with Alcon is anywhere between 350 and 500.

Rather than up to the 800, Larry. Current pricing for those is north of the number you mentioned, it’s more like the 175 level. And I think there is some opportunity particularly with new customers to take that up and still be selling it, you know, more outside.

But I think here, Larry, the big thing is what are Alcon doing and we know they aggressively lobbied to get this CMS ruling, we jumped on the back of it, which was pleasing, and my view is Alcon are going to drive this market as hard as they can on a platform of improved profitability for basic cataract surgery for doctors who have faced reduced reimbursement for cataract in the past. And it’s basically going forward, I was at a meeting last week where it was indicating, you know, another 25 percent drop over the next few years in anticipation of all the baby boomers getting into the cataract age group.

Right, right. So in terms of, in terms of your U.S. business today in Toric IOLs, I’m calculating it’s something around 3 or 4 percent of global revenue, is that a reasonable guess?

It’s about 10 percent of our unit volume in the U.S., Larry, of IOLs that we sell are in the Toric segment.

Okay. So that — I am coming out to somewhere around, roughly 1.5 million to 2 million, is that a reasonable guess?

Sorry. Toric IOLs being somewhere in the 1.5 million area, something like that, maybe 2 million.

So this, all of the things being equal, then for ‘07, just with the price increase of roughly double, David, you are suggesting prices will roughly double, that should add a couple million dollars incremental to your revenue right there.

Well, I don’t — that is possible. I’m not predicting that, Larry, because you’ve got a base business where you can’t just hike the price. So incremental business would definitely come at high growth.

It’s a blend of around that and it’s going to depend a lot on what on Alcon do. You know, I’m pleased — I’m optimistic for us based on what I firmly believe Alcon are going to do with this market. The bigger the pie they make we can do very well out of it.

And as a result, I don’t know if we’ve mentioned it, but this year we are going to be looking at developing our Collamer platform into a Toric, putting our Toric optics on the Collamer lens and hopefully launch that next year.

Hi. I got on the call a little late so I apologize if this was addressed already, but I did hear Larry’s question and I wanted to expand on that a bit in terms of the cataract Toric IOLs, I guess, how much do you expect this ruling to impact sales going forward?

I have in my model that it’s going to, for example, in 2007, it’s going to add approximately 3.5 million to cataract sales and I wanted to know if that was, you know, somewhere in the ballpark or that is also what you were thinking as well? And also what you project sales, yes, how much you think sales would be from the cataract Toric IOLs will be going forward?

I don’t want to forecast the numbers exactly. All I’ll say that I think there is an opportunity for price expansion and market expansion with this opportunity and I think it’s going to be very much driven by the trend that is set by Alcon and all indications are they’re pushing toward a premium price in $350, $500 range and all indications are that they’re going to push as much of the base cataract market to a Toric market as they can effectively execute based on a platform that the doctor can improve the profitability of the base cataract surgery. So I think – you know, I don’t want to predict your numbers, Nancy, but I believe this represents a solid opportunity and we are moving quickly to the try to position ourselves to exploit that fully.

Okay. And as a follow-up question, do you know of any other companies that plan on having a Toric IOL on the market?

Hi, thanks. Actually Larry and Nancy have asked my questions for me. Thank you, and congratulations to you guys on a good quarter.

Mark Malcolm, private investor, please go ahead. Mr. Malcolm, your line is open, please go ahead.

Several questions, in your prepared remarks you indicated that you were still preparing responses to the FDA before the panel that you have on Toric ICL?

Okay. That is in your control. When do you expect you will have those responses ready to be submitted?

Understood. That was the first target time for the panel. So you are basically expecting a later summer than what — against their schedule before you will actually go to the panel?

Mark, I don’t think we’ve ever given a target time for going to panel. That wholly is not within our control.

That’s not within your control. I am referencing their tentative schedule for the year.

No, it definitely wouldn’t have been early this year. You know, if it happens, it’ll happen later this year.

Understood. Several things about, in your international markets, in India with what you put on January 11, you indicated that you had approval to import but you did not have formal approval of the ICL, and TICL, yet you have at least 12 doctors in India who are ICL certified. Do you have sales ongoing in the country?

Yes, we have sales ongoing in India. The product is approved. There was a change in the regulations in India and I think I’m correct in saying that we were ahead of those regs so it is approved to be used. We have ongoing sales and we also put a person on the ground in India mid-last year in order to work with distributors directly to the exploit that market. So the same kind of model that we’ve used in China and we are using in the Middle East and other countries.

You said you used a trainer concept in China. About how many doctors do you have certified there now?

I don’t have that number at hand, I would say probably 15 to 20. What I can tell investors definitively is we’ve employed an MD ophthalmologist on the ground in China whose job it is to certify the doctors in China and that person joined us late last year, December. So we’re moving forward nicely with that execution.

Understood. With your joint venture with Canon STAAR your website indicates you have at least five Japanese doctors who are — five or seven who are now ICL certified. Are you selling in Japan the ICL product?

In Japan pre-approval, doctors can import the product directly and we are selling a limited number of lenses to doctors directly in Japan. And, in fact, that number recently increased because the surgeon pool that had done the clinical trial asked to expand the number of surgeons to, I believe, 13 to allow them to have access to the product.

Understood. One of your goals about a year ago was that Korea would be in excess of 4 percent. In January you indicated about 3.2 percent. How close are you to 4 percent or more in any of your markets with the ICL penetration?

Yes, great question. The caution here is there’s no published LASIK numbers for international as there are in the U.S. which are audited. I’ve pointed that out in the past. We estimate Korea is around 3.2 percent but it’s changing all the time. So, you know, in a high — I highlight Spain and Korea at 3.2 and we estimate Spain is around about 3 percent, 2.9. Things are going well there and we are pleased with that. It’s moving all the time.

What do you think you’ll do in Europe to increase your penetration rates? What is so different in that market that you have basically such relatively low ICL sales in comparison to what you have in Asia and basically on the periphery of Europe?

Their markets are more commercially oriented. Their centers are more concentrated with larger volume. Korea has higher myopia on average, so I mean myopia is around minus eight. The market dynamics, the commercial situation varies greatly and that’s one of the big determinates of the rate of adoption.

I can’t really generalize. What I can generalize is the activity where we continue to focus distributor management, we continue to focus on distributors who are good at selling refractive products. We continue to bring people on board under our control out of Switzerland who can support the distributor in the surgeon management and in the execution of the marketing plan.

And to that end, at the end of this week we’ve got a meeting with general managers of distributors to show them what a good business the ICL is to be in and to encourage them as we did in the sales meeting last July to invest more in direct proctors on the ICL within the distributor and that’s been very successful.

So those are the kind of things that we’re doing continually in investing to get a return. As you see in the sales line, it’s delivering. So it’s going to be more of the same, Mark.

Management, there are no further questions at this time. Please continue with any closing comments.

Great. Thank you, everybody, for asking great questions. As I said in my opening remarks, we will continue to focus on execution and look forward to bringing superior technologies to market and driving the sales line towards profitability and cash flow positive situations.

Thank you. Ladies and gentlemen, this concludes the STAAR Surgical fourth results quarter conference call. You may now disconnect.


Delaware	0-11634	95-3797439
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1911 Walker Ave, Monrovia, California		91016
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	STAAR Surgical Company

March 21, 2007	By:	/s/ David Bailey

		Name: David Bailey
		Title: President and CEO


Exhibit No.		Description

10.63		Promissory Note between STAAR Surgical Company and Broadwood Partners, L.P., dated March 21, 2007.
10.64		Warrant Agreement between STAAR Surgical Company and Broadwood Partners, L.P., dated March 21, 2007.
99.1		Transcript of Conference Call held on March 14, 2007.


(Please Print) whose address is



		Dated:


		Holder’s Signature:

		Holder’s Address:


Date of Report (Date of Earliest Event Reported):		March 14, 2007


Registrant’s telephone number, including area code:		626-303-7902