Related Party Transactions

6 Months Ended

Jun. 27, 2020

3. Related Party Transactions

The Company’s Chairman and Chief Executive Officer (CEO) is also the Chairman and CEO of Cercacor Laboratories, Inc. (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 a cross-licensing agreement (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 $3.1 million and $2.9 million for the three months ended June 27, 2020 and June 29, 2019, respectively. Aggregate liabilities to Cercacor arising under the Cross-Licensing Agreement were $6.2 million and $5.8 million for the six months ended June 27, 2020 and June 29, 2019, 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 less than $0.1 million for each of the three months ended June 27, 2020 and June 29, 2019. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.2 million and $0.1 million for the six months ended June 27, 2020 and June 29, 2019, respectively.

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Lease and Sublease Agreement - Effective December 2019, the Company entered into a lease agreement with Cercacor for approximately 34,000 square feet of office, research and development space at one of the Company’s owned facilities in Irvine (Cercacor Lease). The term of the Cercacor Lease expires on December 31, 2024. 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 expired on December 15, 2019. The Company recognized approximately $0.3 million and $0.1 million of lease and sublease income for the three months ended June 27, 2020 and June 29, 2019, respectively. The Company recognized approximately

$0.5 million and $0.2 million of lease and sublease income for the six months ended June 27, 2020 and June 29, 2019, respectively.

Net amounts due to Cercacor at each of June 27, 2020 and December 28, 2019 were $2.9 million.

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 each of the three months ended June 27, 2020 and June 29, 2019, the Company made no cash contributions to the Masimo Foundation. During the six months ended June 27, 2020 and June 29, 2019, the Company made cash contributions of approximately $1.5 million and $1.0 million, respectively, to the Masimo Foundation. During the three and six months ended June 27, 2020 and June 29, 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 a director of 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. The Company’s EVP, CFO also serves as the Treasurer of PSMF. During the three and six months ended June 27, 2020 and June 29, 2019, the Company made various in-kind contributions to PSMF, mainly in the form of donated office rent and administrative services.

The Company’s CEO is also a co-founder and a member of the board of directors of Like Minded Entertainment (LME), a team of storytellers that create content focused in the areas of true stories, social causes and science. LME creates stories with a multi-platform strategy, bridging the gap between film, television, digital and social media. The Company entered into a marketing service agreement with LME during the second quarter of 2020. During the three and six months ended June 27, 2020, the Company incurred approximately $3.3 million in marketing expenses to LME under the marketing service agreement. At June 27, 2020, there was approximately $1.5 million due to LME for services rendered.

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 and six months ended June 27, 2020 and June 29, 2019, the Company charged the Company’s CEO less than $0.1 million related to such reimbursements.