MASIMO CORP (Form: 8-K, Received: 08/02/2017 17:22:53)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_______________________

FORM 8-K

__________________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 27, 2017

_______________________

MASIMO CORPORATION

(Exact name of registrant as specified in its charter)

_______________________



Delaware	001-33642	33-0368882
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)



52 Discovery Irvine, California		92618
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (949) 297-7000

Not Applicable

(Former name or former address, if changed since last report)

_ ______________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:



o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2 (b))
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933(§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
	Emerging growth company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.		o



Item 5.02. ..... Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On July 27, 2017 , Masimo Corporation (“Masimo” or the “Company”) entered into the First Amendment to November 4, 2015 Amended and Restated Employment Agreement (the “First Amendment”) with Joe Kiani, Masimo’s Chairman and Chief Executive Officer. The First Amendment modified the Amended and Restated Employment Agreement entered into between Masimo and Mr. Kiani on November 4, 2015 (the “November 2015 Agreement,” as amended by the First Amendment, the “Amended Employment Agreement”).

The contract was amended following numerous meetings of the Compensation Committee of Masimo’s Board of Directors (the “Board”), including numerous meetings with the Compensation Committee’s independent compensation consultants and legal advisors. A variety of factors were considered in making the amendment, including a shift in the Company’s focus to a new seven year plan as a standalone company and feedback from certain stockholders that the 10% per year reduction (scheduled to begin on January 1, 2018) in the restricted stock unit grant made in connection with the November 2015 Agreement was not aligned with the long-term interests of stockholders. The Compensation Committee believes that the changes in the First Amendment and the other previously disclosed significant executive compensation changes made in 2017 align the interests of management with the long-term interests of stockholders. These other 2017 executive compensation changes include:


•	Adoption of a new equity compensation plan, which was approved at the 2017 stockholders meeting, and included many stockholder-friendly changes, including: elimination of an evergreen provision, elimination of the ability to reprice stock options without stockholder approval, and elimination of share recycling.


•	The grant of performance-based equity awards as a component of our executive compensation program, instead of solely granting stock options.


•	Adoption of a cash bonus plan and the implementation of cash bonus metrics for fiscal 2017 based on our actual achievement of pre-established performance levels for revenues and net income per diluted share, as adjusted for certain non-recurring items. The maximum bonus payable is capped at 200% of target.

The First Amendment provides for the following material changes to the November 2015 Agreement:

1. No automatic 100% bonus; bonus is capped .

The November 2015 Agreement provided that Mr. Kiani was eligible to receive an annual bonus equal to 100% of his base salary, based on Masimo attaining certain financial goals; provided that, if the Board or the Compensation Committee determined that Masimo achieved certain pre-established financial measures under Masimo’s Executive Annual Cash Bonus Award Plan, Mr. Kiani would automatically receive a bonus equal to 100% of his base salary for such year. Under the Amended Employment Agreement, Mr. Kiani’s annual target bonus remains at 100% of his base salary; but he is no longer entitled to any automatic bonus, and the bonus payable will not be increased above the payment level determined based on actual achievement of the applicable performance criteria. In addition, Mr. Kiani’s annual bonus payable if all applicable performance criteria are achieved at maximum levels is capped at 200% of his base salary.

2. The right to a 300,000 stock option grant is eliminated .

The November 2015 Agreement provided that Mr. Kiani was entitled to receive a grant of 300,000 stock options in each of fiscal years 2016 and 2017. Under the Amended Employment Agreement, Mr. Kiani is not entitled to the guaranteed grant of 300,000 stock options in fiscal year 2017.

3. Additional double-trigger restrictions have been added to Mr. Kiani’s right to terminate his employment for Good Reason following a Change in Control .

The November 2015 Agreement provided that a termination of Mr. Kiani’s employment by Mr. Kiani following a Change in Control (as defined in the November 2015 Agreement) would constitute “Good Reason” for purposes of determining whether Mr. Kiani is entitled to receive certain severance benefits under the November 2015Agreement. Under the Amended Employment Agreement, a termination of Mr. Kiani’s employment by Mr. Kiani following a Change in Control will only constitute “Good Reason” if: (1) the Change in Control was triggered as a result of a change in more than one third of the directors on the Board during a rolling twenty four month period, or (2) following, or in connection with, a Change in Control triggered as a result of an acquisition, (a) the highest level parent entity holding, directly or indirectly, majority voting control of the Company after the Change in Control (the “Acquirer Parent”) is not a publicly-traded entity, (b) Mr. Kiani does not become the, or is removed from the position of, Chief Executive Officer and Chairman of the Board of the Acquirer Parent, with such position being on terms and conditions reasonably acceptable to Mr. Kiani, provided that terms and conditions of employment providing for total compensation with a value comparable to the total compensation paid to the chief executive officers of comparable companies (without regard

to any payments or benefits provided to Mr. Kiani under the Amended Employment Agreement) shall be deemed to be reasonable for purposes of the foregoing, or (c) any other director is designated the lead director of the board of directors of the Acquirer Parent.

4. The period during which Mr. Kiani may terminate his employment for Good Reason has been extended .

The November 2015 Agreement provided that, other than as a result of Mr. Kiani’s receipt of a notice of non-renewal from the Company, a termination of Mr. Kiani’s employment by Mr. Kiani for “Good Reason” may only be effected by providing the Company with a notice of termination within ninety days following the event giving rise to the “Good Reason” for terminating the November 2015 Agreement. Under the Amended Employment Agreement, the time period during which Mr. Kiani may provide a notice of termination for Good Reason has been extended from ninety days following the event giving rise to the “Good Reason” to two years following such event.

5. Modifications to severance payment reductions .

The November 2015 Agreement provided that, if prior to 2018, (1) Masimo terminated Mr. Kiani’s employment other than for cause, death or disability, or (2) Mr. Kiani terminated his employment with Masimo for Good Reason (each a “Qualifying Termination”), Masimo would issue Mr. Kiani 2.7 million shares of its common stock (the “Award Shares”) pursuant to the terms of a restricted share unit award agreement between Masimo and Mr. Kiani and pay him $35.0 million in cash (the “Cash Payment”). The November 2015 Agreement further provided that each year, beginning on January 1, 2018, the number of Award Shares and the Cash Payment would each be reduced by 10% of the original amount so that after December 31, 2026, no Award Shares or Cash Payment would be due if there is a Qualifying Termination.

Under the Amended Employment Agreement, the reduction has been eliminated. In addition, in the event of a Change in Control prior to a Qualifying Termination, on each of the first and second anniversaries of the Change in Control, 50% of the Cash Payment and 50% of the Award Shares will vest, subject in each case to Mr. Kiani’s continuous employment through each such anniversary date; however, in the event of a Qualifying Termination or a termination of Mr. Kiani’s employment due to death or disability prior to either of such anniversaries, any remaining unvested amount of the Cash Payment and all of the unvested Award Shares shall vest and be paid in full. In addition, in the event of a Change in Control prior to a Qualifying Termination, Mr. Kiani’s stock options and any other equity awards will vest in accordance with their terms, but in no event later than in two equal installments on each of the first and second anniversaries of the Change in Control, subject in each case to Mr. Kiani’s continuous employment through each such anniversary date.

6. Modifications to term of grantor trust .

The November 2015 Agreement provided that, immediately prior to a Change in Control, Masimo must fund a grantor trust with an amount equal to the aggregate of (1) a cash severance benefit equal to two times the sum of: (a) Mr. Kiani’s then-current base salary, and (b) the average annual bonus paid to Mr. Kiani during the immediately preceding three years, (2) the Award Shares and (3) the Cash Payment, payable to Mr. Kiani in the event of a Qualifying Termination. The November 2015 Agreement further provided that in the event that Mr. Kiani’s employment was not terminated on or prior to the second anniversary of the Change in Control in a manner entitling him to such payments, the amounts held in the trust would revert to Masimo. Since the period during which Mr. Kiani has a right to terminate his employment for Good Reason has been extended under the Amended Employment Agreement, the term of the grantor trust has also been amended such that the amounts held in the trust will revert to Masimo only in the event that Mr. Kiani’s employment is not terminated on or prior to the fifth anniversary of the Change in Control in a manner entitling him to such payments.

The foregoing description of the First Amendment and the Amended Employment Agreement does not purport to be complete and is qualified in its entirety by reference to: (1) the November 2015 Agreement, which was filed as Exhibit 10.1 to Masimo’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 5, 2015, and (2) the First Amendment filed as Exhibit 10.1 to this Current Report on Form 8-K, each of which are incorporated by reference herein.



Item 9.01.	Financial Statements and Exhibits.

(d) The following item is filed as an exhibit to the Current Report on Form 8-K.



Exhibit No.	Description
10.1	First Amendment to November 4, 2015 Amended and Restated Employment Agreement, dated July 27, 2017, by and between Masimo Corporation and Joe Kiani.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, Masimo Corporation has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	MASIMO CORPORATION

Date: August 2, 2017	By:	/s/ M ARK P. DE R AAD
		Mark P. de Raad
		Executive Vice President & Chief Financial Officer
		(Principal Financial Officer)

FIRST AMENDMENT TO NOVEMBER 4, 2015

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS FIRST AMENDMENT TO THE NOVEMBER 4, 2015 AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “ Amendment ”) is made and entered into as of July 27, 2017, by and between Masimo Corporation, a Delaware corporation (the “ Company ”), and Joe Kiani (the “ Executive ”).

RECITALS

A. The Executive is the founder of the Company and has been its Chairman of the Board and Chief Executive Officer (“ CEO ”) since its inception. The Board of Directors of the Company (the “ Board ”) recognizes that the Executive’s contributions as Chairman of the Board and CEO have been instrumental to the success of the Company. The Executive and the Company entered into an amended and restated employment agreement dated November 4, 2015 (the “ Agreement ”). The Board and the Executive desire to amend the Agreement pursuant to the terms hereof to assure the Company of the Executive’s continued employment in an executive capacity and to compensate him therefor.

B. The Company considers the establishment and maintenance of a sound management to be essential to protecting and enhancing the best interests of the Company and its stockholders.

C. The Board has determined that appropriate steps should be taken to retain the Executive and to reinforce and encourage his continued attention and dedication to his assigned duties.

D. The Company desires to continue to retain the services of the Executive, and the Executive desires to continue to be employed by the Company pursuant to the terms and conditions of the Agreement, as amended by this Amendment.

NOW, THEREFORE, in consideration of the premises, the mutual promises and the mutual covenants and agreements hereinafter set forth, the Company and the Executive hereby agree that the Agreement is amended as follows:


1.	Section 5.2 of the Agreement is deleted and replaced with the following:

BONUS. The Executive shall be eligible to receive a target annual bonus equal to one-hundred percent (100%) of his Base Salary based on the Company’s performance against the performance criteria established by the Board (or designated committee) under the Company’s annual incentive plan for officers, and such annual bonus shall not be subject to positive discretion to increase his annual bonus above that determined based on performance against the performance criteria; provided that the Executive’s annual bonus shall not exceed two hundred percent (200%) of his Base Salary for such year.


2.	Section 5.3 of the Agreement is deleted and replaced with the following:

STOCK OPTIONS AND RELATED INCENTIVE PLANS. The Executive shall be eligible to participate in the Company’s existing incentive programs and any additional or successor incentive plan or plans. During each fiscal year during the Employment Period after fiscal year 2016, the Executive shall receive equity grants having a value at least consistent with equity grants made to comparable chief executive officers of comparable companies (taking into account revenues, market capitalization and industry).


3.	Section 7.4 of the Agreement is deleted and replaced with the following:

TERMINATION BY THE EXECUTIVE. The Executive may terminate his employment hereunder (i) for Good Reason, (ii) if his health should become impaired to an extent that makes the continued performance of his duties hereunder hazardous to his physical or mental health or his life, or (iii) at any time by giving six (6) months’ written notice to the Company of his intention to terminate. For purposes of this Agreement, “ Good Reason ” shall mean (A) except in connection with a termination of the Executive’s employment for Cause, any diminution in the Executive’s responsibilities, duties and authority set forth in Section 2 hereof, whether due to the assignment to the Executive of any responsibilities, duties or authority that constitute such a diminution or otherwise, including (i) the Executive ceasing to serve as a Chief Executive Officer of the Company or (ii) the Executive ceasing to serve as the Chairman of the Board of the Company or the designation of any director other than the Executive as the lead director of the Board, (B) a reduction in the Executive’s rate of compensation or a reduction in the Executive’s fringe benefits or any other failure by the Company to comply with Section 5 hereof, (C) any failure by the Company to comply with Section 4 hereof, (D) the provision of a Notice of Non-Renewal by the Company, (E) a “ Change in Control, ” as that term is defined in Section 9 hereof, triggered as a result of clause (iii) thereof dealing with change in Board composition, or (F) if, following, or in connection with, a “ Change in Control, ” as that term is defined in Section 9 hereof, triggered as a result of clauses (i) or (ii) thereof, (x) the highest level parent entity holding, directly or indirectly, majority voting control of the Company following the relevant transaction (the “ Acquirer Parent ”), is not a publicly-traded entity, (y) the Executive does not become, or the Executive is removed from the position of (other than due to a removal in connection with a termination of employment under Sections 7.1, 7.2 or 7.3 hereof), the Chief Executive Officer and Chairman of the Board of Directors of the Acquirer Parent, with such position being, in all events, on terms and conditions (embodied in an employment agreement) reasonably acceptable to the Executive, it being agreed that terms and conditions of employment that provide for total compensation having a value comparable to the total compensation paid to comparable chief executive officers of companies comparable to the Acquirer Parent (taking into account revenues, market capitalization and industry) shall be reasonable, without considering any payments or benefits provided to the

Executive pursuant to this Agreement, or (z) any director other than the Executive is designated as the lead director of the Board of Directors of the Acquirer Parent; provided that , in each case of clauses (A), (B), (C), (E) and (F) above, “Good Reason” shall not be deemed to exist unless (x) the Executive provides the Company a Notice of Termination within two (2) years following the initial occurrence of such event, (y) the Company fails to cure the event giving rise to Good Reason within thirty (30) days following its receipt of such Notice of Termination (the “ Cure Period ”) and (z) the Executive’s resignation for Good Reason is effective within thirty (30) days after the expiration of the Cure Period.


4.	Section 8.4(iii) of the Agreement is deleted and replaced with the following:

(iii) Other Payments.

(1) On November 4, 2015, the Company granted the Executive a one-time grant of 2,700,000 restricted share units (“ RSUs ”) (as adjusted for stock splits, stock dividends, recapitalizations and similar transactions) under the Masimo Corporation 2007 Stock Incentive Plan and a restricted share unit award agreement dated as of November 4, 2015 (the “ Award Agreement ”). Except as provided in Section 8.4(iii)(3) below, each RSU shall vest effective as of immediately prior to a Qualifying Termination (the “ Vesting Date ”) during the Employment Period. Each RSU shall represent the right to receive, on the tenth (10th) day following the Vesting Date (subject to Section 8.6 hereof), one share of common stock of the Company (“ Common Stock ”). Notwithstanding the foregoing, the Board, in its sole discretion, may accelerate the vesting of some or all of the RSUs at any time prior to the Vesting Date, provided that payment of the RSUs accelerated in accordance with this sentence shall be made in shares of Common Stock on the (10th) day following the date of the Executive’s “separation from service” within the meaning of Treasury Regulation Section 1.409A−1(h) (subject to Section 8.6 hereof). In the event of any inconsistency between the terms of this Agreement and the Award Agreement or the Plan, the terms of this Agreement shall govern.

(2) Upon a Qualifying Termination, the Company shall pay to the Executive in a single lump sum on the sixtieth (60th) day following the Executive’s termination of employment (subject to Section 8.6 hereof) a cash amount equal to thirty-five million dollars ($35,000,000) (the “ Cash Payment ”). The Cash Payment (the “ Non-Competition Payment ”) is being paid to the Executive in consideration of the Executive’s agreement to comply with Sections 1 and 11 of the Restrictive Covenant Agreement and shall be subject to repayment to the Company in the event of a final determination by the Superior Court of California for the County of Orange that the Executive has materially breached such covenants. The Company agrees that the Non-Competition Payment constitutes reasonable compensation under Section 280G(b)(4)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”).

(3) Upon the occurrence of a Change in Control prior to a Qualifying Termination, the RSUs and Cash Payment shall vest in equal installments on the first two anniversaries of the date of such Change in Control (each, a “ Retention Vesting Date ”), subject to the Executive’s continuous employment through each applicable Retention Vesting Date, provided that if the Executive’s employment terminates due to a Qualifying Termination or pursuant to Sections 7.1 (Death) or 7.2 (Disability) hereof prior to the final Retention Vesting Date, any remaining unvested portions of the RSUs and Cash Payment shall immediately vest effective as of the date of such termination of employment. Payment of the RSUs that vest in accordance with this Section shall be made in shares of Common Stock on the (10th) day following the date of the Executive’s “separation from service” within the meaning of Treasury Regulation Section 1.409A−1(h) (subject to Section 8.6 hereof). The Cash Payment that vests in accordance with this Section shall be paid on the date of the Executive’s “separation from service” within the meaning of Treasury Regulation Section 1.409A−1(h) (subject to Section 8.6 hereof). Notwithstanding the foregoing, as soon as practicable following the final Retention Vesting Date, the service recipient shall use commercially reasonable efforts to accelerate payment of the RSUs and Cash Payment in accordance with the “plan termination” rules set forth in Treasury Regulation Section 1.409A−3(j)(4)(ix), in a manner designed to provide for earliest possible payment without any accelerated taxation or penalties by reason of Section 409A of the Code. In addition, upon the occurrence of a Change in Control prior to a Qualifying Termination, the Executive’s stock options and other equity awards (if any) shall vest in in accordance with their terms but in no event later than in two equal installments on each Retention Vesting Date, subject to the Executive’s continuous employment through each applicable Retention Vesting Date.


5.	The second to last sentence of Section 8.4(iv) of the Agreement is deleted and replaced with the following:

In the event the Executive’s employment is not terminated on or prior to the fifth anniversary of the Change in Control in a manner entitling him to the Benefits, the amounts held in the Trust shall revert to the Company, provided that such reversion shall have no effect on the Executive’s continuing entitlement to receive the Benefits in accordance with this Section 8.4.


6.	Each instance of the words “twelve (12)” appearing in clause (iii) of Section 9 of the Agreement shall be replaced with the words “twenty-four (24)”.


7.	The last sentence of Section 17 (Survival) of the Agreement is deleted and replaced with the following:

For the sake of clarity, all payments and benefits that may become owing as a result of the specified terminations or other vesting events shall only be due and become owing for terminations or other vesting events that occur during the Employment Period as then in effect without regard to any termination of

employment but shall be owing and paid regardless of whether the Employment Period has ended prior to such payments having been completed.

PERMITTED DISCLOSURES. Pursuant to 18 U.S.C. § 1833(b), the Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret of the Company that (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to the Executive’s attorney and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. If the Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, the Executive may disclose the trade secret to the Executive’s attorney and use the trade secret information in the court proceeding, if the Executive (I) files any document containing the trade secret under seal, and (II) does not disclose the trade secret, except pursuant to court order. Nothing in this Agreement or the Restrictive Covenant Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by such section. Nothing in this Agreement, the Restrictive Covenant Agreement or any agreement the Executive has with the Company shall prohibit or restrict the Executive from making any voluntary disclosure of information or documents related to any violation of law to any governmental agency or legislative body, or any self-regulatory organization, in each case, without advance notice to the Company.


9.	ENTIRE AGREEMENT; REFERENCES. Other than as specifically amended, the Agreement will remain in full force and effect, provided that any section references contained in the Agreement shall be updated as necessary to reflect the provisions of this Amendment. References to “this Agreement” in the Agreement shall refer to the Agreement, as amended by this Amendment.


10.	INTERPRETATION. This Amendment shall in all respects be interpreted, construed and governed by and in accordance with the laws of the State of California, without regard to conflicts of laws principles.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Company at the direction of the Compensation Committee of the Board has caused this Amendment to be executed as of the day and year first above written.



	“Company”	MASIMO CORPORATION

	By:	/s/ C RAIG R EYNOLDS
	Name:	Craig Reynolds
	Its:	Chairperson of the Compensation Committee of the Board of Directors


	“Executive”	/s/ J OE K IANI
		Joe Kiani
	Its:	Chairman of the Board & CEO

[Signature Page to First Amendment to Amended and Restated Employment Agreement]