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Related Party Transactions
 9 Months Ended
Sep. 28, 2024
Related Party Transactions [Abstract]  
Related Party Transactions
3. Related Party Transactions
On October 24, 2024, following a review by outside counsel, the Board adopted resolutions to terminate the employment of Mr. Kiani, effective October 24, 2024. See Note 24, “Commitments and Contingencies”, for further details.
Mr. Kiani, our former Chairman and CEO, is the Chairman and CEO of Willow Laboratories, Inc. (Willow). The Company is a party to the following agreements with Willow:
•Cross-Licensing Agreement - The Company and Willow 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 annual minimum royalty obligation is $5.0 million prior to a change in control (as defined in the Cross-Licensing Agreement) of the Company or Willow and increases to $15.0 million upon a change in control, plus up to $2.0 million for each additional rainbow® parameter (with no maximum ceiling for non-vital sign measurements). Aggregate liabilities payable to Willow arising under the Cross-Licensing Agreement were $4.2 million and $5.2 million for the three months ended September 28, 2024 and September 30, 2023, respectively. Aggregate liabilities payable to Willow arising under the Cross-Licensing Agreement were $13.2 million and $15.1 million for the nine months ended September 28, 2024 and September 30, 2023, respectively.
•Administrative Services Agreement - The Company is a party to an administrative services agreement with Willow (G&A Services Agreement), which governs certain general and administrative services that the Company provides to Willow. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.2 million and $0.1 million for each of the three months ended September 28, 2024 and September 30, 2023, respectively. Amounts charged by the Company pursuant to the G&A Services Agreement were $0.4 million and $0.3 million for each of the nine months ended September 28, 2024 and September 30, 2023, respectively.
•Lease Agreement - Effective December 2019, the Company entered into a lease agreement with Willow for approximately 34,000 square feet of office, research and development space at one of the Company’s owned facilities in Irvine (Willow Lease). The term of the Willow Lease expires on December 31, 2024. The Company recognized approximately $0.3 million of lease income for each of the three months ended September 28, 2024 and September 30, 2023. The Company recognized approximately $0.9 million of lease income for each of the nine months ended September 28, 2024 and September 30, 2023.
Net amounts due to Willow at September 28, 2024 and December 30, 2023 were approximately $3.8 million and $4.1 million, respectively. See Note 24, “Commitments and Contingencies”, under the heading of “Willow Cross-Licensing Agreement Provisions” for further details.
As of September 28, 2024, the Company has halted payments to 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. Mr. Kiani is the Chairman of the Masimo Foundation. 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. For the three months ended September 28, 2024, the Company made cash contributions of approximately $1.5 million to the Masimo Foundation. For the three months ended September 30, 2023, the Company made no cash contributions to the Masimo Foundation. For the nine months ended September 28, 2024, the Company made cash contributions of approximately $2.5 million to the Masimo Foundation. For the nine months ended September 30, 2023, the Company made cash contributions of approximately $1.0 million to the Masimo Foundation. During the three and nine months ended September 28, 2024 and September 30, 2023, the Company made various in-kind contributions to the Masimo Foundation, mainly in the form of donated administrative services. As noted above, the Company halted all payments to the Masimo Foundation as of the end of the third quarter of 2024.
Mr. Kiani is also a co-founder and a member of the board of directors of Like Minded Media Ventures (LMMV), a team of storytellers that create content focused in the areas of true stories, social causes and science. LMMV 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 LMMV for audiovisual production services promoting brand awareness, including television commercials and digital advertising, during the second quarter of 2020. During the three and nine months ended September 28, 2024, the Company incurred no marketing expenses to LMMV under the marketing service agreement. During the three and nine months ended September 30, 2023, the Company incurred $0.4 million and $1.2 million of marketing expenses to LMMV under the marketing service agreement, respectively. At each of September 28, 2024 and December 30, 2023, there were no amounts due to LMMV for services rendered.
During the second quarter of 2021, the Company entered into a software license and professional services agreement with Like Minded Labs (LML), a subsidiary of LMMV. Pursuant to the software license agreement, LML granted the Company a perpetual, non-exclusive and fully paid-up right and license to integrate LML’s software into the Company’s products in exchange for a $3.0 million one-time license fee. Pursuant to the professional services agreement, LML will provide professional services to the Company, including the development of custom software intended to support the integration of the licensed software into the Company’s products, as well as future support services upon the Company’s acceptance of deliverables.
In July 2021, the Company entered into a patent purchase and option agreement with Vantrix Corporation (Vantrix), an acquiree of LML, for certain patents for $0.5 million, and the right to purchase two pools of additional patents from Vantrix for an exercise fee of up to $1.1 million. The agreements with LML and Vantrix include sublicensing provisions whereby the software and patents are licensed back to LML or Vantrix, respectively, for further advancement of the technologies.
The Company maintained an aircraft time share agreement with Mr. Kiani, pursuant to which the Company agreed from time to time to make its aircraft available to Mr. Kiani, in his former capacity as Chairman and CEO, for lease on a time-sharing basis. The Company charged Mr. Kiani for personal use of the aircraft based on agreed upon reimbursement rates. For each of the three and nine months ended September 28, 2024, the Company charged Mr. Kiani less than $0.1 million pursuant to this agreement. For each of the three and nine months ended September 30, 2023, the Company charged Mr. Kiani less than $0.1 million pursuant to this agreement. As of the end of the quarter, the time share agreement with Mr. Kiani has been terminated. In October 2024, the Company grounded the corporate aircraft and has been exploring disposition strategies.
On June 26, 2023, at the Company’s 2023 annual meeting of stockholders, its stockholders voted to elect two directors nominated by Politan Capital Management LP and certain of its affiliates (Politan) to the Company’s Board of Directors (Board). On September 19, 2024, at the Company’s 2024 annual meeting of stockholders, two additional directors nominated by Politan were elected to the Board. As of September 24, 2024, the date of the last reported Schedule 13-D/A filed with the U.S. Securities and Exchange Commission (SEC), Politan held approximately 8.8% of the outstanding shares of the Company. There were no related party transactions between Masimo and Politan for each of the three and nine months ended September 28, 2024 and September 30, 2023.
On September 24, 2024, Michelle Brennan, a member of the Board, was appointed to the role of interim CEO of the Company. Ms. Brennan also sits on the board of directors of Cardinal Health, Inc. (Cardinal). For the three and nine months ended September 28, 2024, sales to Cardinal were approximately $27.2 million and $82.9 million, respectively. For the three and nine months ended September 30, 2023 sales to Cardinal were approximately $26.9 million and $69.1 million, respectively. As of September 28, 2024 and December 30, 2023, amounts owed from Cardinal were approximately $10.8 million and $7.3 million, respectively.