SCHEDULE: STAAR Surgical Board Overhaul: Broadwood Gains Influence

STAAR Surgical Company and activist investor Broadwood Partners reach a cooperation agreement, leading to significant board changes and CEO transition.

Summary

• STAAR Surgical Company and Broadwood Partners, L.P., which beneficially owns 31.1% of STAAR's outstanding common stock, have entered into a cooperation agreement effective January 14, 2026.
• The agreement mandates an increase in the Board of Directors' size from six to seven members.
• Stephen C. Farrell, the current CEO, and Elizabeth Yeu, the Chair, have resigned from the Board; Mr. Farrell will remain CEO until January 31, 2026, or an earlier date determined by the Board.
• Three new directors have been appointed: Neal C. Bradsher and Richard T. LeBuhn from Broadwood, and Christopher Min Fang Wang from Yunqi Capital, which owns 6.5% of STAAR's stock.
• The Company commits to nominating these new directors for election at its 2026 annual meeting of stockholders.
• Both parties have agreed to mutual non-disparagement clauses and comprehensive mutual liability releases for all claims existing prior to and including the effective date of the agreement.
• STAAR Surgical will reimburse Broadwood Partners for up to $6 million, Yunqi Capital for up to $1 million, and Defender Capital for up to $25,000 in reasonable out-of-pocket expenses related to their engagement and the Proposed Merger Special Meeting.

Sentiment

Score: 7

Explanation: The agreement resolves a period of shareholder activism, leading to a refreshed board with significant shareholder representation. While there are costs associated with the agreement and a CEO transition, the overall sentiment is positive due to the potential for enhanced profitability and long-term value creation through aligned governance and new expertise.

Positives

• The cooperation agreement resolves a period of shareholder activism, fostering a more stable governance environment for STAAR Surgical.
• The addition of three new directors, including representatives from major shareholders Broadwood and Yunqi Capital, enhances board alignment with significant investor interests.
• New board members bring valuable expertise in public market investments, healthcare, and business in China, which could strengthen strategic decision-making.
• Mutual liability releases between STAAR Surgical and Broadwood Partners reduce the risk of future litigation stemming from past interactions.
• Management comments indicate a renewed focus on enhancing profitability and driving sustainable, long-term value creation, leveraging the company's strong market position.

Negatives

• STAAR Surgical will incur significant expenses, totaling up to $7.025 million, to reimburse Broadwood, Yunqi Capital, and Defender Capital for their engagement and proxy solicitation efforts.
• The upcoming departure of CEO Stephen C. Farrell from the Board and as CEO by January 31, 2026, introduces short-term leadership uncertainty.
• Broadwood Partners has agreed to a standstill provision, limiting its ability to request a special meeting of stockholders until June 18, 2026, which temporarily restricts certain shareholder actions.

Risks

• Leadership transition risk: The impending change in CEO by January 31, 2026, could lead to shifts in operational strategy or company culture, potentially impacting performance during the transition period.
• Integration risk: The new board members, despite their expertise, will need to effectively integrate with the existing board to ensure cohesive governance and strategic execution.
• Shareholder influence risk: While the agreement resolves immediate activist concerns, the substantial ownership by Broadwood (31.1%) and Yunqi Capital (6.5%) indicates a continued strong activist presence that could exert significant influence on future company direction.

Future Outlook

The renewed Board intends to make additional announcements regarding STAAR's next Chair and CEO in the near term. The new board members aim to enhance profitability and drive sustainable, long-term value creation, leveraging the company's leading technology, strong financial position, and privileged market position for growth and profit margin expansion.

Management Comments

• "We welcome our new Board members, who bring to STAAR expertise with respect to relevant public market investments, healthcare, and business in China, as well as the perspectives of long-term investors and supporters of STAAR. We will work together to enhance profitability and drive sustainable, long-term value creation." Louis Silverman, STAAR director.
• "I am honored to join STAAR’s Board. The Company’s leading technology, strong financial position, and privileged market position provide it with the opportunity to achieve growth and profit margin expansion. As STAAR’s largest shareholder, Broadwood is committed to helping the Company realize its full potential." Neal C. Bradsher, Broadwood Founder and President.
• "I want to thank Liz Yeu for her early recognition of the advantages of the ICL over tissue removal refractive procedures. I want to thank Steve Farrell for leading STAAR out of a difficult situation in early 2025 and back to profitability and cash flow generation. And I look forward to working with Art Butcher, an accomplished senior executive of one of the world’s most successful medical device companies, as well as my other new colleagues on the STAAR Board." Neal C. Bradsher.
• "I believe that the exit compensation package provided to Steve by the prior board was appropriate based on the conditions at the time." Neal C. Bradsher.

Industry Context

STAAR Surgical is a global leader in phakic IOLs for vision correction. This agreement reflects a broader industry trend where significant institutional investors, particularly activist ones like Broadwood, increasingly influence corporate governance and strategic direction. The emphasis on 'business in China' and 'profit margin expansion' aligns with common strategic priorities in the medical device sector, focusing on growth in key international markets and operational efficiency.

Comparison to Industry Standards

• NA

Management Changes

Corporate Governance

Stakeholder Impact

• Shareholders: Significant impact due to board refreshment, increased representation of major shareholders, and a stated focus on enhancing profitability and long-term value. The resolution of activist pressure could be seen positively.
• Management/Employees: CEO Stephen C. Farrell is stepping down from the Board and as CEO by January 31, 2026, indicating a leadership transition. Other employees may experience changes in strategic direction under the new board and CEO.
• Customers/Suppliers: No direct immediate impact mentioned, but a renewed focus on profitability and strategic direction could indirectly affect operations and relationships in the long term.
• Creditors: No direct impact mentioned.

Next Steps

• The Company will issue a mutually agreed-upon press release promptly following the Effective Date.
• The Company will file a Current Report on Form 8-K with the SEC within four business days.
• Broadwood will file an amendment to its Schedule 13D with the SEC within two business days.
• The Board intends to make additional announcements regarding STAAR's next Chair and CEO in the near term.
• The Company will nominate each new director for election to the Board at the 2026 annual meeting of stockholders.

Key Dates

Recommendation

The filing details a significant corporate governance overhaul, including board changes and a CEO transition, resulting from an agreement with an activist investor. While the resolution of activist pressure and the stated commitment to enhancing profitability are positive, the immediate future involves leadership uncertainty and integration of new board members. The company is also incurring substantial expenses for reimbursement. Given these factors, a 'hold' recommendation is appropriate as investors await further clarity on the new leadership's strategic direction and execution, and to assess the impact of the board changes on company performance. The stock may experience volatility during this transition period.

Keywords

STAAR Surgical, Broadwood Partners, Board of Directors, Corporate Governance, CEO Transition, Shareholder Activism, SEC Filing, NASDAQ: STAA, Implantable Collamer Lenses, EVO ICL