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Related Party Transactions
 12 Months Ended
Dec. 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, our former Chairman and Chief Executive Officer, effective October 24, 2024. See Note 24, “Commitments and Contingencies”, for further details.
Willow Laboratories, Inc. (Willow), formerly known as Cercacor Laboratories, Inc., is an independent entity that was spun off from the Company to its stockholders in 1998. Joe Kiani, the Company’s former Chairman and Chief Executive Officer (CEO), is also the Chairman and CEO of Willow. Effective as of January 3, 2016, in connection with changes in the capital structure of Willow, the Company determined that Willow was no longer required to be consolidated. Although the Company believes that Willow continues to be considered a variable interest entity, the Company has determined that it is no longer the primary beneficiary of Willow as it does not have the power to direct the activities of Willow that most significantly impact Willow’s economic performance and has no obligation to absorb Willow’s losses.
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, which is a perpetual global license. Prior to a change in control, which is defined in the Willow Cross-Licensing Agreement to include, among other things, Mr. Kiani ceasing to serve as CEO of either the Company or Willow, the Company’s annual minimum royalty obligation is $5.0 million. Upon a change in control of the Company or Willow: (i) all rights to the “Masimo” trademark will be assigned to Willow if the surviving or acquiring entity ceases to use “Masimo” as a company name and trademark; (ii) the option to license technology developed by Willow for use in blood glucose monitoring will be deemed automatically exercised and a $2.5 million license fee for this technology will become immediately payable to Willow; and (iii) the minimum aggregate annual royalties payable to Willow for carbon monoxide, methemoglobin, fractional arterial oxygen saturation, hemoglobin and/or glucose measurements will increase to $15.0 million per year until the exclusivity period of the agreement ends, plus up to $2.0 million for each additional rainbow® parameter (with no maximum ceiling for non-vital sign measurements). Any payment due annually to Willow resulting from a change in control of the Company is less than what the Company paid to Willow for licensing rights in 2022 or 2023.
On October 24, 2024, a change in control as defined in the Willow Cross-Licensing Agreement occurred when Mr. Kiani’s employment as the Company’s CEO was terminated, resulting in a payment of $2.5 million for the licensing of Willow blood glucose monitoring technology. See Note 9, “Intangible Assets, Net”, for further details. A change in control does not otherwise impact the scope or duration of the license rights. No additional accruals or payments were made in connection with the change in control under the Willow Cross-Licensing Agreement.
Aggregate recorded royalty amounts to Willow by the Company under the Cross-Licensing Agreement were $20.4 million, $19.2 million and $16.9 million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively. The Company had sales to Willow in the amount of $0.3 million, $0.1 million and $0.2 million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, 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 $0.5 million, $0.5 million and $0.4 million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, 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 expired on December 31, 2024, and was not renewed. The Company recognized approximately $1.2 million of lease income for each year ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively.
Net amounts accrued and unpaid to Willow were approximately $5.0 million and $4.1 million as of December 28, 2024 and December 30, 2023, respectively. See Note 24, “Commitments and Contingencies”, under the heading of “Willow Cross-Licensing Agreement Provisions” for further details.
Masimo Foundation for Ethics, Innovation and Competition in Healthcare (Masimo Foundation) is 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) served as the Treasurer of the Masimo Foundation and the Company’s EVP, General Counsel and Corporate Secretary served as the Secretary for the Masimo Foundation. Effective January 9, 2025, the Masimo Foundation Board appointed a new Treasurer and Secretary, and Messrs. McClenahan and Young resigned from their respective roles with the Masimo Foundation.
For the fiscal year ended December 28, 2024, the Company made cash contributions of approximately $2.5 million to the Masimo Foundation. For the fiscal year ended December 30, 2023, the Company made cash contributions of approximately $1.0 million to the Masimo Foundation. For the fiscal year ended December 31, 2022, the Company made no contributions to the Masimo Foundation. In addition, for each of the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company made various in-kind contributions to the Masimo Foundation, mainly in the form of donated administrative services. During the period ended December 28, 2024, the Company halted all payments to the Masimo Foundation. The Company does not intend to make any future contributions to the Masimo Foundation.
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. For the fiscal year ended December 28, 2024, the Company incurred no marketing expenses to LMMV under the marketing service agreement. During the fiscal years ended December 30, 2023, and December 31, 2022, the Company incurred $1.5 million and $1.4 million in marketing expenses to LMMV under the marketing service agreement, respectively. At December 28, 2024 and December 30, 2023, there were no amounts due to LMMV for services rendered. During the fourth quarter of 2024, the Company terminated the marketing services agreement with LMMV. No payment was due in connection with the termination of this agreement.
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. See Note 9, “Intangible Assets, Net”, for further details.
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. See Note 9, “Intangible Assets, Net”, for further details.
The Company maintained an aircraft time share agreement, 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 agreement provided that Mr. Kiani would pay the Company for personal use based on agreed upon reimbursement rates. During each of the fiscal years ended December 28, 2024 and December 30, 2023, the Company charged Mr. Kiani less than $0.1 million related to such reimbursements. For the fiscal year ended December 31, 2022, the Company charged Mr. Kiani $0.1 million related to such reimbursements. The time share agreement with Mr. Kiani was terminated upon his resignation from the Company.
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) by Politan, Politan beneficially owned approximately 8.8% of the outstanding shares of the Company. For the fiscal year ended December 28, 2024, the Board approved a payment, and the Company paid Politan for the reimbursement of out of pocket proxy and legal related costs incurred by Politan in connection with two proxy contests and related litigation to ensure that Politan’s nominees were permitted to stand for election to the Board in the amount of approximately $27.6 million. For fiscal year end December 30, 2023, the Company paid Politan approximately $18.0 million pursuant to an award issued by the Delaware Court of Chancery to reimburse Politan for out of pocket legal fees and expenses incurred in successfully challenging certain provisions in the Company’s bylaws and provisions in Mr. Kiani's Amended Employment Agreement that precluded Politan from nominating candidates for election to the Board.
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 fiscal year ended December 28, 2024, December 30, 2023 and December 31, 2022, sales to Cardinal were approximately $114.1 million, $93.9 million and $103.0 million, respectively. As of December 28, 2024 and December 30, 2023, amounts owed from Cardinal were approximately $15.2 million and $7.3 million, respectively.