Related Party Transactions

9 Months Ended

Sep. 28, 2019

3. Related Party Transactions

The Company’s Chairman and Chief Executive Officer (CEO) is also the Chairman and CEO of Cercacor. The Company is a party to the following agreements with Cercacor:

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Cross-Licensing Agreement - The Company and Cercacor are parties to the Cross-Licensing Agreement, which governs each party’s rights to certain intellectual property held by the two companies. The Company is subject to certain annual minimum aggregate royalty obligations for use of the rainbow^® licensed technology. The current annual minimum royalty obligation is $5.0 million. Aggregate liabilities to Cercacor arising under the Cross-Licensing Agreement were $3.4 million and $3.0 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Aggregate liabilities to Cercacor arising under the Cross-Licensing Agreement were $9.2 million and $7.5 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

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Administrative Services Agreement - The Company is a party to an administrative services agreement with Cercacor (G&A Services Agreement), which governs certain general and administrative services that the Company provides to Cercacor. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.1 million or less for each of the three months ended September 28, 2019 and September 29, 2018. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.2 million and $0.1 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

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Sublease Agreement - In March 2016, the Company entered into a sublease agreement with Cercacor for approximately 16,830 square feet of excess office and laboratory space located at 40 Parker, Irvine, California (Cercacor Sublease). The Cercacor Sublease began on May 1, 2016 and expires on November 30, 2019. The Company recognized $0.1 million in sublease income for each of the three months ended September 28, 2019 and September 29, 2018. The Company recognized less than $0.3 million in sublease income for each of the nine months ended September 28, 2019 and September 29, 2018.

Net amounts due to Cercacor at September 28, 2019 and December 29, 2018 were $3.4 million and $2.9 million, respectively.

The Company’s CEO is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare (Masimo Foundation), a non-profit organization that was founded in 2010 to provide a platform for encouraging ethics, innovation and competition in healthcare. In addition, the Company’s Executive Vice President (EVP), Chief Financial Officer (CFO) serves as the Treasurer of the Masimo Foundation and the Company's EVP, General Counsel and Corporate Secretary serves as the Secretary for the Masimo Foundation. During the three and nine months ended September 28, 2019, the Company made various in-kind contributions to the Masimo Foundation, mainly in the form of donated administrative services.

The Company’s CEO is also the Chairman of both the Patient Safety Movement Foundation (PSMF), a non-profit organization which was founded in 2013 to work with hospitals, medical technology companies and patient advocates to unite the healthcare ecosystem and eliminate the more than 200,000 U.S. preventable hospital deaths that occur every year by 2020, and the Patient Safety Movement Coalition (PSMC), a not-for-profit social welfare organization that was founded in 2013 to promote patient safety legislation. The Company’s EVP, CFO also serves as the Treasurer of both PSMF and PSMC, and the Company’s EVP, General Counsel and Corporate Secretary also serves as the Secretary for PSMC. During the three and nine months ended September 28, 2019, the Company made various in-kind contributions to PSMF, mainly in the form of donated office space and administrative services.

The Company maintains an aircraft time share agreement, pursuant to which the Company has agreed from time to time to make its aircraft available to the Company’s CEO for lease on a time-sharing basis. The Company charges the Company’s CEO for personal use based on agreed upon reimbursement rates. For each of the three months ended September 28, 2019 and September 29, 2018, the Company charged the Company’s CEO less than $0.1 million related to such reimbursements. For the nine months ended September 28, 2019 and September 29, 2018, the Company charged the Company’s CEO $0.1 million and $0.2 million related to such reimbursements, respectively.