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o
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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ý
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Definitive Proxy Statement
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o
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Definitive Additional Materials
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o
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Soliciting Material Pursuant to §240.14a-12
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MASIMO CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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ý
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No fee required.
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o
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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o
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Fee paid previously with preliminary materials.
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o
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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ABOUT MASIMO
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1
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Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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TABLE OF CONTENTS
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n
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NOTICE OF 2020 ANNUAL MEETING OF STOCKHOLDERS
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n
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PROXY STATEMENT SUMMARY
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n
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OUR EXECUTIVE OFFICERS
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n
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OUR BOARD OF DIRECTORS
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n
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CORPORATE GOVERNANCE AND BOARD MATTERS
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¡
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Corporate Governance Guidelines
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¡
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Consideration of Director Nominees
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¡
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Board Leadership Structure
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¡
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Board’s Role in Risk Oversight
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¡
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Investor Feedback and Engagement
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¡
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Corporate Social Citizenship & Responsibility
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¡
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Charitable Outreach
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¡
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Adoption of Proxy Access
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¡
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Meetings and Executive Sessions
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¡
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Policy Regarding Board Member Attendance at Annual Meetings
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¡
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Independence of the Board of Directors
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¡
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Code of Business Conduct and Ethics
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¡
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Stockholder Communications with the Board of Directors
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¡
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Information Regarding Board Committees
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¡
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Non-Employee Director Compensation
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n
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AUDIT COMMITTEE MATTERS
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¡
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Audit Committee’s Pre-Approval Policies and Procedures
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¡
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Principal Accountant Fees and Services
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¡
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Audit Committee Report
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TABLE OF CONTENTS - CONTINUED
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n
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EXECUTIVE COMPENSATION
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¡
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Compensation Discussion and Analysis
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¡
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Compensation Committee Report
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¡
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Compensation Committee Interlocks and Insider Participation
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¡
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Summary Compensation Table
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¡
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Grants of Plan-Based Awards During Fiscal Year 2019
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¡
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Outstanding Equity Awards on December 28, 2019
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¡
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Option Exercises and Stock Vested During Fiscal Year 2019
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¡
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Employment Arrangements with Named Executive Officers
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¡
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Pay Ratio Disclosure
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n
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OWNERSHIP OF OUR STOCK
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¡
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Security Ownership of Certain Beneficial Owners and Management
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¡
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Securities Authorized for Issuance
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¡
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Stock Ownership Policy
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¡
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Non-Employee Director Stock Ownership Policy
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n
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ADDITIONAL INFORMATION
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¡
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PROPOSAL 1: Election of Directors
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¡
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PROPOSAL 2: Ratification of Selection of Independent Registered Public Accounting Firm
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¡
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PROPOSAL 3: Advisory Vote to Approve the Compensation of Our Named Executive Officers
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¡
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PROPOSAL 4: Approval of an Amendment to our 2017 Equity Incentive Plan
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Á
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PROPOSAL 5: Approval of an Amendment to our Executive Bonus Incentive Plan
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¡
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Transactions with Related Persons, Promoters and Certain Control Persons
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¡
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Questions and Answers You May Have About These Proxy Materials and Voting
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¡
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Householding
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¡
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Annual Report on Form 10-K
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¡
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Important Notice Regarding Availability of Proxy Materials for Stockholders Meeting to be Held on May 29, 2020
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¡
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Other Matters
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TABLE OF CONTENTS - CONTINUED
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n
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APPENDIX A
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A-1
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n
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APPENDIX B
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B-1
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n
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APPENDIX C
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C-1
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n
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APPENDIX D
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D-1
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SPECIAL NOTE ON FORWARD LOOKING INFORMATION
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PROXY STATEMENT SUMMARY
|
||||
|
||||
The Annual Meeting and this Proxy Statement provide an important opportunity for us to communicate with you about the achievements of the past year and the leadership of Masimo. As you consider your vote, we ask that you carefully review the information in this Proxy Statement, which includes an overview of our business and summarizes key aspects of our performance, executive compensation and corporate governance.
The following summary highlights certain information contained elsewhere in this Proxy Statement. This summary does not contain all the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
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DATE AND TIME
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VOTING MATTERS
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See Page
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Board Recommendation
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Friday, May 29, 2020, 2:00 p.m. PST
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PROPOSAL 1
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To elect two Class I Directors as named in our Proxy Statement
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Page 93
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FOR each
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LOCATION
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PROPOSAL 2
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To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending January 2, 2021
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Page 95
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FOR
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Masimo Offices
52 Discovery Irvine, California 92618
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|
||||
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PROPOSAL 3
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To provide an advisory vote to approve the compensation of our named executive officers
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Page 96
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FOR
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RECORD DATE
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March 30, 2020
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PROPOSAL 4
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To approve an amendment to our 2017 Equity Incentive Plan
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Page 97
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FOR
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PROPOSAL 5
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To approve an amendment to our Executive Bonus Incentive Plan
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Page 109
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FOR
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Total Stockholder Return
|
|||
Year-End 2019
|
|||
1-YEAR
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3-YEAR
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5-YEAR
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47.2%
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134.5%
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500.0%
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Top Quartile*
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Above Median*
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1
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Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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*
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Represents comparison with our 2019 Proxy Statement peer group.
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1
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Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
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Type
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Component
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Objective
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Fixed compensation
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Base salary
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l
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Fixed portion of annual cash compensation
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l
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Attract and retain talent
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l
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Motivate strong business performance without encouraging excessive risk-taking
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Performance-based
Compensation
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Annual incentive
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l
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Variable, earned amounts paid annually
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l
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Drive the achievement of key business results on an annual or multi-year basis
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l
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Recognize individuals based on their contributions
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l
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Performance-based and not guaranteed
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Long-term incentives
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l
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Variable, equity-based:
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l 25% in the form of stock options that vest annually over a five year period; and
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l 75% in the form of performance share units (“PSUs”) that vest after three years based on our actual performance as measured against multiple pre-established performance objectives at the end of the performance period.
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l
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Reinforce the need for long-term sustained performance and business growth
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l
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Focus executives on annual objectives that support the long-term business strategy and creation of stockholder value
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l
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Align the long-term interests of executives and stockholders
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l
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Balance cash payments with equity ownership
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l
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Encourage retention
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Total long-term incentive compensation =
|
84.6%
|
|
Total long-term incentive compensation =
|
72.8%
|
|
||
Total “at-risk” compensation =
|
92.3%
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Total “at-risk” compensation =
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81.9%
|
|
|
þ
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ý
|
||
|
What We Do
|
|
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What We Don’t Do
|
||
þ
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Maintain an Independent Compensation Committee
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ý
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No Guaranteed Bonuses
|
||
þ
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Compensation Committee Retains an Independent Compensation Advisor
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ý
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No Special Executive Retirement Plans
|
||
þ
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Annual Executive Compensation Review
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ý
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No Hedging; Pledging Requires Pre-Approval
|
||
þ
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Compensation At-Risk - Pay For Performance
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ý
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No Tax Payments on Perquisites
|
||
þ
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Annual Compensation-Related Risk Assessment
|
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ý
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No Tax Gross-Up Payments on Post-Employment Compensation Arrangements
|
||
þ
|
Multi-Year Vesting Requirements
|
|
ý
|
No Stock Option Re-pricing
|
||
þ
|
Compensation Recovery (“Clawback”) Policy
|
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ý
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No Evergreen Provision
|
||
þ
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Stock Ownership Policies
|
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|
||
þ
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Annual Stockholder Advisory Vote on Named Executive Officer Compensation
|
|
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|
||
þ
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Stockholder Engagement that Includes our Compensation Committee Chairperson
|
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Stockholder Advisory Vote (“Say-On-Pay Vote”)
|
||||
|
||||
In 2019, stockholders continued their support for our fiscal 2018 executive compensation programs with approximately 85% approval of the stockholder advisory votes. Consistent with the Company’s strong interest in stockholder engagement and our pay-for-performance approach, the Compensation Committee continues to review our executive compensation program to ensure alignment between the respective interests of our executives and stockholders. No significant changes were made for fiscal 2019.
|
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Board Independence
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Board Effectiveness
|
||||
þ
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All but one of our non-employee directors are independent(1)
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þ
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All directors attended more than 75% of the Board and their committee meetings
|
||
þ
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Maintain an independent Compensation Committee
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þ
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Commitment to Board refreshment with 5 new independent directors since 2014
|
||
þ
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Compensation Committee retains an independent compensation advisor
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þ
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Diverse Board with mix of skills, tenure and age
|
||
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þ
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Director nominee selection process aligned with our long-term strategic plans
|
||
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Best Practices
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Stockholder Rights
|
||||
þ
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Stock ownership policy for executive and Board members
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þ
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Annual stockholder advisory vote on named executive officer compensation
|
||
þ
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Annual compensation-related risk assessment
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þ
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Stockholder engagement that includes our Compensation Committee Chairperson
|
||
þ
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Annual executive compensation review
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þ
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Stockholders have proxy access with market standard conditions for director nominations
|
||
þ
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Compensation recovery (“Clawback”) policy
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þ
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No stockholder rights plan (“poison pill”)
|
||
þ
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No hedging; pledging requires pre-approval
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(1)
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Dr. Barker, who receives compensation from us for consulting services as our Chief Science Officer and Chairman of our Scientific Advisory Board, is our only non-employee director who is not independent.
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EXECUTIVE OFFICERS
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Name
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Age(1)
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Position(s)
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Joe Kiani
|
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55
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Chief Executive Officer & Chairman of the Board
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Micah Young
|
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41
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Executive Vice President, Chief Financial Officer
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Bilal Muhsin
|
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39
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Chief Operating Officer
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Jon Coleman
|
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56
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President, Worldwide Sales, Professional Services & Medical Affairs
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Yongsam Lee
|
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55
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Executive Vice President, Chief Information Officer
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Tao Levy
|
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46
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Executive Vice President, Business Development
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Tom McClenahan
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47
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Executive Vice President, General Counsel & Corporate Secretary
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Anand Sampath
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53
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Executive Vice President, Operations & Clinical Research
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(1)
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As of April 15, 2020.
|
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Joe Kiani
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Chief Executive Officer & Chairman of the Board
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Employee Since: 1989
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|
Joe Kiani is the founder of Masimo and has served as Chief Executive Officer (“CEO”) & Chairman of the Board since our inception in 1989. He is an inventor on more than 100 patents related to signal processing, sensors and patient monitoring, including patents for the invention of Measure-through motion and low-perfusion pulse oximetry. Since September 2016, Mr. Kiani has served on the Board of Directors of Stereotaxis, Inc. (NYSE:STXS), a manufacturer of robotic cardiology instrument navigation systems. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. In addition to Mr. Kiani’s role at Masimo, he is also the Chairman of the Masimo Foundation for Ethics, Innovation and Competition in Healthcare, and the Chairman and CEO of Cercacor Laboratories, Inc. Mr. Kiani also serves on a number of other Boards of Directors, including CHOC Children’s Orange/CHOC Children’s at Mission Hospital, Bioniz Therapeutics, Inc., the Patient Safety Movement Foundation, the Medical Device Manufacturers Association and SMSbiotech, Inc. As Masimo’s founder, Chief Executive Officer and Chairman of the Board since our formation in 1989, Mr. Kiani has the deepest understanding of Masimo, our history, our culture and our technology. He has broad experience in a wide range of functional areas, including strategic planning, strategic investments, engineering and development, and legal and governmental affairs. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Kiani is critical to our continued development and growth.
|
|
Micah Young
|
Executive Vice President, Chief Financial Officer
|
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Employee Since: 2017
|
|
Micah Young has served as our Executive Vice President, Chief Financial Officer (“CFO”) since October 2017. From July 2012 to September 2017, Mr. Young served as Vice President, Finance, at NuVasive, Inc. (Nasdaq: NUVA), a medical device company focused on the design, development and marketing of products for the surgical treatment of spine disorders. Prior to that time, he served as NuVasive, Inc.’s Senior Director, Finance, Global Operations, from December 2009 to July 2012. From 2002 to 2009, Mr. Young held various accounting and finance positions with Zimmer Holdings, Inc., a company focused on the design, development, manufacture and marketing of orthopedic reconstructive, spinal and trauma devices, dental implants and related surgical products. Prior to his time at Zimmer Holdings, Inc., Mr. Young was an accountant at Deloitte & Touche LLP from 2000 to 2002. He holds a Bachelor of Science, Accounting and Criminal Justice from Indiana Wesleyan University and is a Certified Public Accountant (inactive).
|
|
Bilal Muhsin
|
Chief Operating Officer
|
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Employee Since: 2000
|
|
Bilal Muhsin has served as our Chief Operating Officer since May 2019. Prior to this, Mr. Muhsin served as Executive Vice President, Engineering, Marketing and Regulatory Affairs from March 2018 to May 2019. Prior to March 2018, Mr. Muhsin, held various other roles including Executive Vice President, Engineering; Vice President, Engineering, Instruments and Systems; Director and Manager level positions within Masimo since June 2000. Mr. Muhsin’s technical, product and overall leadership skills have helped Masimo bring revolutionary new products to the marketplace, including Masimo’s Patient Safety Net, Radical-7®, Root™ and various significant software products. Mr. Muhsin holds a B.S. in Computer Science from San Diego State University.
|
|
Jon Coleman
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President, Worldwide Sales, Professional Services & Medical Affairs
|
|
Employee Since: 2008
|
|
Jon Coleman has served as our President, Worldwide Sales, Professional Services & Medical Affairs since February 2011, and was our President, International from August 2008 to February 2011. From October 2007 to August 2008, Mr. Coleman was President and Chief Executive Officer of You Take Control, Inc., a healthcare information technology start-up company. He served as General Manager, Americas of Targus Group International, a supplier of mobile computing cases and accessories, from March 2006 to February 2007. From March 1994 to February 2006, he held progressive leadership positions with Pfizer, Inc., ultimately as its as Vice President and General Manager, Canada & Caribbean Region. Mr. Coleman holds a M.B.A. from Harvard Business School, and a B.A. in International Relations from Brigham Young University.
|
|
Yongsam Lee
|
Executive Vice President, Chief Information Officer
|
|
Employee Since: 1996
|
|
Yongsam Lee has served as our Executive Vice President, Chief Information Officer since August 2014. From March 1996 to October 2001 and from April 2002 to August 2014, Mr. Lee held various positions with us, including Vice President, IT, Chief Information Officer, Executive Vice President, Operations, Executive Vice President, Regulatory Affairs & Chief Information Officer. From October 2001 to April 2002, he served as Director of IT at SMC Networks, Inc., a provider of networking solutions. Mr. Lee holds a B.S. in Applied Physics from the University of California, Irvine.
|
|
Tao Levy
|
Executive Vice President, Business Development
|
|
Employee Since: 2018
|
|
Tao Levy has served as our Executive Vice President, Business Development since January 2018. From March 2013 to December 2017, Mr. Levy served as Managing Director, Medical Devices Equity Research, at Wedbush Securities. Prior to that time, he served as Senior Analyst, Medical Devices Equity Research at Loewen Ondaatje McCutcheon, from August 2012 to March 2013. From September 2010 to February 2012, Mr. Levy was Managing Director, Medical Devices Equity Research at Collins Stewart. Prior to his time at Collins Stewart, Mr. Levy was Director, Medical Devices Equity Research at Deutsche Bank where he served from 2002 to 2010. He holds a Bachelor of Arts in Biology from the University of Pennsylvania.
|
|
Tom McClenahan
|
Executive Vice President, General Counsel & Corporate Secretary
|
|
Employee Since: 2011
|
|
Tom McClenahan has served as our Executive Vice President & General Counsel since April 2013 and as our Corporate Secretary since August 2014. From April 2011 to April 2013, Mr. McClenahan was our Vice President and Assistant General Counsel. From November 2002 to April 2011, he was an associate and then principal with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an associate with the law firm of Knobbe, Martens, Olson & Bear. Mr. McClenahan holds a B.S. in Mechanical Engineering from Iowa State University and a J.D. from the University of Minnesota Law School.
|
|
Anand Sampath
|
Executive Vice President, Operations & Clinical Research
|
|
Employee Since: 2006
|
|
Anand Sampath has served as our Executive Vice President, Operations & Clinical Research since May 2019. Prior to that he served as Chief Operating Officer from August 2014 to May 2019. Prior to that, he served as Executive Vice President, Engineering since March 2007. From April 2006 to March 2007, Mr. Sampath was our Director of Systems Engineering. From October 1995 to March 2006, he held various positions, including Program Manager, Engineering Manager and Distinguished Member of Technical Staff, at Motorola, Inc. Mr. Sampath is an inventor on more than ten patents relating to patient monitoring, wireless networks and communications. He holds a B.S. in Engineering from Bangalore University.
|
BOARD OF DIRECTORS
|
Name
|
|
Age(1)
|
|
Director Class
|
|
Term Expires
|
|
Position(s)
|
Steven J. Barker, M.D., Ph.D.
|
|
75
|
|
Class I
|
|
2020(2)
|
|
Director
|
H Michael Cohen
|
|
54
|
|
Class I
|
|
2020
|
|
Director
|
Sanford Fitch
|
|
79
|
|
Class I
|
|
2020(2)
|
|
Director
|
Thomas Harkin
|
|
80
|
|
Class II
|
|
2022
|
|
Director
|
Joe Kiani(3)
|
|
55
|
|
Class II
|
|
2021
|
|
Chief Executive Officer & Chairman of the Board
|
Adam Mikkelson
|
|
41
|
|
Class III
|
|
2022
|
|
Director
|
Craig Reynolds
|
|
71
|
|
Class III
|
|
2022
|
|
Director
|
Julie A. Shimer, Ph.D.
|
|
67
|
|
Class I
|
|
2020
|
|
Director
|
(1)
|
As of April 15, 2020.
|
(2)
|
Dr. Barker’s and Mr. Fitch’s service on the Board will cease when their current terms expire at the Annual Meeting.
|
(3)
|
Please see “Executive Officers” on page 17 of this Proxy Statement for Mr. Kiani’s biography.
|
DIRECTOR SKILLS MATRIX
|
|
|
|
|
|
|||
Director Nominee Skills and Experience
|
|
|||||||
CEO & Board Leadership
CEO and board leadership experience brings skills that help our Board to capably advise, support, and oversee our executive management team, and our strategy to drive long-term value.
|
|
|
|
|
ü
|
|
ü
|
ü
|
Financial expertise
Financial expertise assists our Board in overseeing our financial statements, capital structure and internal controls.
|
|
ü
|
ü
|
|
|
ü
|
|
ü
|
Government/Public Policy
Government and public policy expertise offer us insight into the governmental/regulatory environment of the many jurisdictions in which we operate, their legislative and administrative priorities, and the potential implications of our business.
|
|
|
|
ü
|
|
|
|
|
Academics/Science
Academics and science backgrounds benefits our Board with their technical expertise and advice, along with providing valuable guidance on research trends, and emerging areas of innovation, R&D and engineering trends.
|
ü
|
|
|
|
|
|
|
ü
|
Healthcare Industry
Healthcare industry experience brings a deep understanding of factors affecting our industry, operations, business needs, and strategic goals.
|
ü
|
ü
|
ü
|
ü
|
ü
|
ü
|
ü
|
ü
|
Medical Device Operations
Medical device operations increase the Board’s understanding of our distribution and manufacturing operations
|
|
|
ü
|
|
ü
|
|
ü
|
ü
|
International
International exposure yields an understanding of diverse business environments, economic conditions, and cultural perspectives that shapes our global business perspective, strategy and enhances oversight of our multinational operations.
|
|
ü
|
ü
|
|
ü
|
ü
|
ü
|
ü
|
Diversity
Representation of a range of perspectives expands the Boards understanding of the needs and viewpoints of consumers, employees, healthcare providers, investors and other worldwide.
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ü
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ü
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ü
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ü
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ü
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SKILLS AND QUALIFICATION OF OUR BOARD OF DIRECTORS
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CORPORATE GOVERNANCE AND BOARD MATTERS
|
CORPORATE GOVERNANCE PRACTICES
|
•
|
except in unusual circumstances, the positions of Chairman of our Board and CEO will be held by the same person;
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•
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ordinarily, directors should not serve on more than five boards of publicly-traded companies, including our Board, and all of our directors currently satisfy this requirement;
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•
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outside directors must own a minimum number of shares of our common stock (see “Non-Employee Director Compensation—Non-Employee Director Stock Ownership Policy” on page of this Proxy Statement for additional information); and
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•
|
a non-employee director will not be nominated for re-election at the next annual meeting of stockholders for which his or her class of directors is up for election following his or her 15th anniversary of service on our Board, unless our Board waives this term limit with respect to such non-employee director as a result of its determination that such nomination is in the best interests of Masimo and its stockholders.
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CHARACTERISTICS OF OUR BOARD - (EXCLUDING OUR CEO)
|
CONSIDERATION OF DIRECTOR NOMINEES
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•
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the highest ethical standards and integrity and a strong personal reputation;
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•
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a background that demonstrates experience and achievement in business, finance, technology, healthcare or other activities relevant to our business and activities;
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•
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a willingness to act on and be accountable for Board and, as applicable, committee decisions;
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•
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an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders;
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•
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an ability to work effectively and collegially with other individuals;
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•
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loyalty and commitment to driving our success and increasing long-term value for our stockholders;
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•
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sufficient time to devote to our Board and, as applicable, committee membership and matters; and
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•
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meeting the independence requirements imposed by the SEC and Nasdaq.
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•
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the name and address of the stockholder and any beneficial owner on whose behalf the nomination is being made;
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•
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the class, series and number of shares of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder and any beneficial owner on whose behalf the nomination is being made;
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•
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any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder and any beneficial owner on whose behalf the nomination is being made has the right to vote any of Masimo’s voting securities;
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•
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any “short” interest in Masimo’s securities held by the stockholder and any beneficial owner on whose behalf the nomination is being made;
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•
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the proposed director candidate’s full legal name, age, business address and residential address;
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•
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complete biographical information for the proposed director candidate, including the proposed director candidate’s principal occupation or employment and business experience for at least the previous five years;
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•
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a description of the proposed candidate’s qualifications as a director;
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•
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the class and number of shares of Masimo that are beneficially owned by the proposed director candidate as of the date of the written recommendation; and
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•
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any other information relating to the proposed director candidate that is required to be disclosed in solicitations for proxies for election of directors pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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BOARD LEADERSHIP STRUCTURE
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BOARD’S ROLE IN RISK OVERSIGHT
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INVESTOR FEEDBACK AND ENGAGEMENT
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CORPORATE RESPONSIBILITY & SUSTAINABILITY
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CHARITABLE OUTREACH
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ADOPTION OF PROXY ACCESS
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MEETINGS AND EXECUTIVE SESSIONS
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POLICY REGARDING BOARD MEMBER ATTENDANCE AT ANNUAL MEETINGS
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INDEPENDENCE OF THE BOARD OF DIRECTORS
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CODE OF BUSINESS CONDUCT AND ETHICS
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STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
|
•
|
the name and address of all the Masimo stockholders on whose behalf the communication is sent; and
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•
|
the number of Masimo shares that are beneficially owned by the stockholders as of the date of the communication.
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INFORMATION REGARDING BOARD COMMITTEES
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|
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Committee Membership
|
|||||||
Name
|
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Independent
|
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Audit
|
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Compensation
|
|
Nominating, Compliance and
Corporate Governance
|
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Employee Director:
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|
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Joe Kiani
|
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—
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—
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—
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|
—
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Non-Employee Directors:
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|
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Steven J. Barker, Ph.D., M.D.(1)(3)
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|
—
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—
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—
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|
—
|
|
H Michael Cohen(4)
|
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u
|
|
¬
|
|
|
—
|
|
—
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Sanford Fitch(3)(5)
|
|
u
|
|
|
|
—
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|
—
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|
Thomas Harkin
|
|
u
|
|
—
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|
ü
|
|
¬
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Adam Mikkelson
|
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u
|
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ü
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ü
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ü
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Craig Reynolds
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u
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—
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¬
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ü
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Julie A. Shimer, Ph.D.(2)
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u
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ü
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—
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|
—
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Total meetings in fiscal 2019
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|
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|
5
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4
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|
2
|
¬
|
Committee Chairperson. À Financial Expert. ü Member. u Independent.
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(1)
|
Dr. Barker has provided consulting services to Masimo since July 2013. He currently serves as our Chief Science Officer and Chairman of our Scientific Advisory Board and previously served as our interim Chief Medical Officer from July 2013 to March 2015.
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(2)
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Dr. Shimer has been a member of our Board since January 2, 2019. She was appointed to the Audit Committee on March 15, 2019.
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(3)
|
Dr. Barker’s and Mr. Fitch’s service on the Board will cease when their current terms expire at the Annual Meeting.
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(4)
|
Mr. Cohen was appointed Audit Committee Chairperson effective March 20, 2020.
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(5)
|
Mr. Fitch’s service on the Audit Committee and as Audit Committee Chairperson ended on March 20, 2020.
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NON-EMPLOYEE DIRECTOR COMPENSATION
|
Compensation Item(s):
|
|
Annual
Amount
|
||||
Annual Cash Retainer(1)
|
|
|
||||
|
Board Service
|
|
$
|
70,000
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Audit Committee
|
|
12,500
|
|
||
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Compensation Committee
|
|
10,000
|
|
||
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Nominating, Compliance and Corporate Governance Committee
|
|
5,000
|
|
||
Chairperson Additional Annual Cash Retainer(1)
|
|
|
||||
|
Audit Committee
|
|
$
|
12,500
|
|
|
|
Compensation Committee
|
|
10,000
|
|
||
|
Nominating, Compliance and Corporate Governance Committee
|
|
10,000
|
|
||
Equity Awards(2)(3)
|
|
|
||||
|
Restricted Share Units
|
|
$
|
180,000
|
|
|
|
|
|
|
|
(1)
|
All annual cash retainers are payable on a quarterly basis in arrears.
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(2)
|
Each year on the date of our annual meeting of stockholders, each non-employee director is granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $180,000, rounded down to the nearest whole share, which vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.
|
(3)
|
The Non-Employee Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.
|
(1)
|
Our Chairman and CEO, Mr. Kiani, is not included in this table as he is an employee of Masimo and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page 71 of this Proxy Statement.
|
(2)
|
As of December 28, 2019, each of the listed non-employee directors held RSU awards with respect to 1,304 shares of our common stock, with the exception of H Michael Cohen and Julie A. Shimer, Ph.D., who each held none.
|
(3)
|
These amounts generally represent the aggregate grant date fair value of the RSU awards granted to each listed non-employee director in fiscal 2019, computed in accordance with Financial Accounting Standard Board Accounting Standard Codification Topic 718 (“ASC Topic 718”). These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2019. The value as of the grant date for the RSU awards is calculated based on the number of RSUs at the grant date market price and is recognized once the requisite service period for the RSUs is satisfied. For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 18 to our Consolidated Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates-Share-Based Compensation,” included in our Annual Report on Form 10-K for the year ended December 28, 2019 that was filed with the SEC on February 19, 2020.
|
(4)
|
As of December 28, 2019, each of the listed non-employee directors held the following number of options: Steven J. Barker, Ph.D., M.D.—30,000; H Michael Cohen—0; Sanford Fitch—50,000; Thomas Harkin—0; Adam Mikkelson—0; Craig Reynolds—100,000; and Julie A. Shimer Ph.D.—0.
|
(5)
|
Consists of fees earned by Dr. Barker for non-employee consulting services provided to the Company.
|
(6)
|
Dr. Shimer was appointed to our Board effective January 2, 2019.
|
|
|
|
|
Annual
Amount |
||||||
Compensation Item(s):
|
|
2019
|
|
2020
|
||||||
Annual Cash Retainer(1)
|
|
|
|
|
||||||
|
Board Service
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
|
|
Audit Committee (for 2020, excludes Chairperson)
|
|
12,500
|
|
|
12,500
|
|
|||
|
Compensation Committee (for 2020, excludes Chairperson)
|
|
10,000
|
|
|
10,000
|
|
|||
|
Nominating, Compliance and Corporate Governance Committee (for 2020, excludes Chairperson)
|
|
5,000
|
|
|
5,000
|
|
|||
Committee Chairperson Annual Cash Retainer(1)
|
|
|
|
|
||||||
|
Audit Committee
|
|
$
|
12,500
|
|
|
$
|
25,000
|
|
|
|
Compensation Committee
|
|
10,000
|
|
|
20,000
|
|
|||
|
Nominating, Compliance and Corporate Governance Committee
|
|
10,000
|
|
|
15,000
|
|
|||
Equity Awards(2)(3)
|
|
|
|
|
||||||
|
Restricted Share Units
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
(1)
|
All annual cash retainers are payable on a quarterly basis in arrears.
|
(2)
|
Consistent with Non-Employee Director Compensation Policy, under the Amended Director Compensation Policy, each year on the date of our annual meeting of stockholders, each non-employee director will be granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $180,000, rounded down to the nearest whole share, which vest on the earlier of the first anniversary of the grant date or the date of the next annual meeting of stockholders.
|
(3)
|
Consistent with Non-Employee Director Compensation Policy, the Amended Director Compensation Policy also provides that all RSU awards granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo.
|
AUDIT RELATED MATTERS
|
AUDIT COMMITTEE’S PRE-APPROVAL POLICIES AND PROCEDURES
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
|
|
Fiscal Year Ended
|
||||||
|
|
December 28, 2019
|
|
December 29, 2018
|
||||
Audit Fees(1)
|
|
$
|
1,995,593
|
|
|
$
|
2,111,428
|
|
Audit-Related Fees(2)
|
|
895,015
|
|
|
69,839
|
|
||
Tax Fees(3)
|
|
35,490
|
|
|
36,305
|
|
||
All Other Fees(4)
|
|
26,377
|
|
|
—
|
|
||
Total Fees
|
|
$
|
2,952,475
|
|
|
$
|
2,217,572
|
|
(1)
|
Audit fees consist of fees billed for services rendered for the audit of our consolidated annual financial statements, including performance of the attestation procedures required by Section 404 of the Sarbanes-Oxley Act of 2002, as amended, review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by Grant Thornton LLP in connection with statutory and regulatory filings or engagements.
|
(2)
|
Audit-related fees consist of fees for assurance and related services performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit of our U.S. retirement savings plan as well as due diligence services in connection with strategic investments and other merger and acquisition-related activities.
|
(3)
|
Tax fees consist of fees related to certain U.S. state and local tax preparation and consultation services.
|
(4)
|
All other fees primarily consist of fees associated with the reimbursement of out-of-pocket expenses related to certain legal matters.
|
AUDIT COMMITTEE REPORT
|
•
|
reviewed and discussed our audited financial statements with management and Grant Thornton LLP, the independent registered public accounting firm;
|
•
|
discussed with Grant Thornton LLP the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC; and
|
•
|
received from Grant Thornton LLP the written disclosures and the letter regarding their communications with the Audit Committee concerning independence as required by the applicable requirements of the Public Company Accounting Oversight Board and discussed Grant Thornton LLP’s independence with them.
|
|
Audit Committee
|
|
Mr. H Michael Cohen
|
|
Mr. Sanford Fitch(1)
|
|
Mr. Adam Mikkelson
|
|
Dr. Julie A. Shimer
|
(1)
|
Mr. Fitch’s service on the Audit Committee and as Audit Committee Chairperson ended on March 20, 2020.
|
EXECUTIVE COMPENSATION
|
COMPENSATION DISCUSSION AND ANALYSIS
|
Name
|
|
Position(s)
|
Joe Kiani
|
|
Chief Executive Officer & Chairman of the Board
|
Micah Young
|
|
Executive Vice President, Chief Financial Officer
|
Bilal Muhsin
|
|
Chief Operating Officer
|
Tom McClenahan
|
|
Executive Vice President, General Counsel & Corporate Secretary
|
Anand Sampath
|
|
Executive Vice President, Operations & Clinical Research
|
EXECUTIVE SUMMARY
|
1
|
Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
*
|
Constant currency growth
|
**
|
Reported growth
|
1
|
Constant currency product revenue and non-GAAP EPS are non-GAAP financial measures - please see Appendix A to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
Measures of
Operating Performance
|
|
Masimo
Performance
|
|
Percentile Ranking
Versus Fiscal 2019 Compensation
Peer Group Companies
|
Return on Equity
|
|
17%
|
|
86th
|
Return on Capital
|
|
17%
|
|
91st
|
Return on Assets
|
|
14%
|
|
92nd
|
Total Revenue Growth
|
|
9%
|
|
61st
|
Operating Margin
|
|
24.0%
|
|
92nd
|
•
|
Annual Cash Incentives - The annual cash incentive plan is designed to provide performance-based compensation that will be earned only upon achieving various pre-established levels of Company financial performance. For fiscal 2019, the Compensation Committee selected 2019 Adjusted Product Revenue2 and 2019 Adjusted Non-GAAP EPS2 as the performance measures for the funding percentages, each weighted equally, as the Compensation Committee believes these performance measures directly support both our short-term strategy and our long-term objective of creating sustainable stockholder value.
|
•
|
Long-Term Incentive (“LTI”) Compensation - Equity Awards - The Compensation Committee believed that a one-year performance period was appropriate for the 2017 PSU awards in light of the transition to our new 2017 Equity Incentive Plan. However, to further align the compensation of our executive officers with long-term performance, the Compensation Committee decided to extend the performance period for the 2018 and 2019 PSU awards from one year to three years. Accordingly, the Compensation Committee granted LTI awards to our executive officers for fiscal 2019 consisting of the following mix of equity awards:
|
◦
|
25% in the form of stock options that vest annually over a five year period; and
|
◦
|
75% in the form of PSU awards that are earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives. For the fiscal 2019 PSU awards, the Compensation Committee selected fiscal 2021 Adjusted Product Revenue2 and fiscal 2021 Adjusted Non-GAAP Operating Margin2 as the performance measures for the targeted PSU award percentages, each weighted equally.
|
Performance Stock Unit Awards
|
||||||
|
2017
|
2018
|
2019
|
2020
|
2021
|
2022
|
2017 Grant
|
1-Year Performance Period
|
Vest(1)
|
Vest(1)
|
Vest(1)
|
Vest(1)
|
|
2018 Grant
|
|
3-Year Performance Period
|
Vest(2)(3)
|
|
||
2019 Grant
|
|
|
3-Year Performance Period
|
Vest(2)(4)
|
(1)
|
The 2017 Grant vests annually at 20% per year through 2021.
|
(2)
|
Assumes that at least the threshold performance level is achieved.
|
(3)
|
The 2018 Grant will vest in fiscal 2021 based on actual performance during 2020. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2020 (or such later date determined by the Compensation Committee).
|
(4)
|
The 2019 Grant will vest in fiscal 2022 based on actual performance during 2021. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2021 (or such later date determined by the Compensation Committee).
|
Effective Date of Response
Fiscal Year
|
|
Corporate Governance or
Compensation Practice
|
`
|
Issues Previously Raised in Stockholder Outreach or
Corporate Governance Reviews |
|
Our Response
|
|
|
|
|
|
|
|
2019
|
|
Proxy access
|
|
Absence of proxy access bylaws
|
|
Adopted proxy access bylaws
|
|
|
|
|
|
|
|
2018
|
|
Executive compensation
|
|
Equity compensation is not directly tied to long-term Company performance
|
|
Granted performance-based equity tied to three-year Company performance
|
|
|
|
|
|
|
|
2017
|
|
Executive compensation
|
|
Equity compensation includes a large discretionary component
|
|
Granted performance-based equity tied to defined target matrix
|
|
|
|
|
|
|
|
2016
|
|
Stockholders’ rights agreement
|
|
Presence of “poison pill” arrangement
|
|
Eliminated the “poison pill”
|
|
Non-employee directors’ stock ownership policy
|
|
Absence of stock ownership policy for members of Board of Directors
|
|
Adopted stock ownership policy for non-employee members of our Board, which requires each non-employee director to own and hold shares of our common stock with a value equal to at least $250,000
|
|
|
|
|
|
|
|
|
2015
|
|
Term limits for service on Board of Directors
|
|
Absence of term limits for non-employee members of Board of Directors
|
|
Adopted term limit of 15 years for non-employee members of our Board
|
|
Tax “gross-up” payments
|
|
Absence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the Company
|
|
In addition, our CEO’s employment agreement, entered into in November 2015, eliminated similar tax “gross-up” provisions. After the elimination of this provision, there are no longer any “gross-up” provisions at the Company
|
|
|
|
|
|
|
|
|
2013
|
|
Executive stock ownership policy
|
|
Absence of formal stock ownership policy for executive officers
|
|
Adopted stock ownership policy for executive officers, which requires our CEO to own and hold shares of our common stock with a value equal to at least six times his annual base salary and our other executive officers to own and hold shares of our common stock with a value equal to the executive officer’s annual base salary
|
|
|
|
|
|
|
|
Effective Date of Response
Fiscal Year |
|
Corporate Governance or
Compensation Practice |
`
|
Issues Previously Raised in Stockholder Outreach or
Corporate Governance Reviews |
|
Our Response
|
|
|
|
|
|
|
|
2012
|
|
Compensation recovery (“clawback”) policy
|
|
Absence of formal compensation recovery (“clawback”) policy
|
|
Adopted formal compensation recovery (“clawback”) policy for executive officers
|
|
|
|
|
|
|
|
2011
|
|
Tax “gross-up” payments
|
|
Absence of formal policy restricting the provision of tax “gross-up” or similar payments in connection with a change in control of the Company
|
|
Adopted formal policy providing that the Compensation Committee will no longer approve any arrangements with executive officers that include a tax “gross-up” or similar provision that results in the Company paying excise taxes on change in control payments
|
•
|
Base Salaries - We increased the annual base salaries of our NEOs, other than Messrs. Young and Muhsin, by 3.0%, which was consistent with the increases provided to our other employees as a whole. The base salary for Mr. Young was increased by 7.0% based on a review of market data from Compensia for similar roles and positions within our compensation peer group. In recognition of Mr. Muhsin’s promotion to the role of Chief Operating Officer, his base salary was increased by 22.8% based on a review of market data from Compensia for similar roles and positions within our compensation peer group. Please see “Base Salary” on page 61 of this Proxy Statement for additional information.
|
•
|
Annual Cash Incentives - Based on our Adjusted Product Revenues2 and Adjusted Non-GAAP EPS2 for fiscal 2019, we paid annual cash bonuses under our fiscal 2019 Executive Bonus Incentive Plan to our NEOs (other than our CEO) for fiscal 2019 ranging from $227,619 to $368,500, and an annual cash bonus to our CEO in the amount of $1,508,183.
|
•
|
Long-Term Incentive (“LTI”) Compensation - Equity Awards - In March 2019, we granted options to purchase shares of our common stock to each of our NEOs (other than our CEO) with a grant date fair value of $299,979 and an option to purchase shares of our common stock to our CEO with a grant date fair value in the amount of $2,999,997. In May 2019, we granted options to purchase shares of our common stock to Mr. Muhsin with a grant date fair value of $2,132,600 in connection with his promotion to Chief Operating Officer. In all cases, the exercise price was equal to the fair market value of our common stock on the date of grant.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
Total long-term incentive compensation =
|
82.1%
|
|
Total long-term incentive compensation =
|
69.4%
|
|
||
Total “at risk” compensation =
|
92.4%
|
|
Total “at risk” compensation =
|
81.9%
|
|
ü
|
Maintain an Independent Compensation Committee. The Compensation Committee consists solely of independent directors who establish our compensation practices.
|
ü
|
Compensation Committee Retains an Independent Compensation Advisor. The Compensation Committee has engaged its own compensation consultant to provide information, analysis and other advice on executive compensation independent of management.
|
ü
|
Annual Executive Compensation Review. At least once a year, the Compensation Committee conducts a review of our compensation strategy.
|
ü
|
Compensation At-Risk - Pay For Performance. Our executive compensation program is designed so that a significant portion of our executive officers’ compensation is “at-risk” based on corporate performance, to align the interests of our executive officers and stockholders.
|
ü
|
Annual Compensation-Related Risk Assessment. The Compensation Committee considers our compensation-related risk profile to ensure that our compensation plans and arrangements do not create inappropriate or excessive risk and are not reasonably likely to have a material adverse effect on the Company. The Compensation Committee has determined that there are no risks arising from our compensation policies and practices for our employees that are reasonably likely to have a material adverse effect on the Company.
|
ü
|
Multi-Year Vesting Requirements. To align the interests of our executive officers and stockholders, the time-based stock-option awards granted to our executive officers vest over a five-year period. In 2019, we granted our executive officers PSU awards that will be earned, if at all, at the end of a three-year performance period based on our actual performance as measured against pre-established performance objectives relating to fiscal 2021 Adjusted Product Revenue2 and fiscal 2021 Adjusted Non-GAAP Operating Margin2.
|
ü
|
Compensation Recovery (“Clawback”) Policy. We have adopted a compensation recovery (“clawback”) policy, which enables our Board to recover incentive compensation (including gains from equity awards) from our current and former executive officers that is based on erroneous data, received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and is in excess of what would have been paid if calculated under the restatement.
|
ü
|
Stock Ownership Policies. We have adopted stock ownership policies for our executive officers and the non-employee members of our Board under which they must accumulate and maintain, consistent with the terms of our stock ownership policy, shares of our common stock. For additional information, see “Ownership Of Our Stock - Stock Ownership Policies” starting on page 90 of this Proxy Statement.
|
ü
|
Annual Stockholder Advisory Vote on Named Executive Officer Compensation. We conduct an annual stockholder advisory vote on the compensation of our NEOs. The Compensation Committee considers the results of this advisory vote during the course of its deliberations on our executive compensation program.
|
ü
|
Stockholder Engagement that Includes our Compensation Committee Chairperson. We engage with our stockholders on executive compensation matters and include our Compensation Committee Chairperson in these engagement activities.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
û
|
No Guaranteed Bonuses. We do not provide guaranteed bonuses to our executive officers.
|
û
|
No Special Executive Retirement Plans. We do not currently offer, nor do we have plans to offer, defined benefit pension plans or any non-qualified deferred compensation plans or arrangements to our executive officers other than the plans and arrangements that are available to all employees. Our executive officers are eligible to participate in our defined contribution plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”), on the same basis as our other employees.
|
û
|
No Hedging; Pledging Requires Pre-Approval. We prohibit our employees, including our executive officers, and the non-employee members of our Board from hedging our equity securities. In addition, all pledging of our equity securities by our executive officers and members of our Board must be pre-approved by the Compensation Committee and, as a condition to pre-approving any pledge of our equity securities, the executive officer or member of our Board seeking to pledge securities must clearly demonstrate his or her financial capacity to repay any loan for which securities will be pledged as collateral without resort to the securities to be pledged.
|
û
|
No Tax Payments on Perquisites. We do not provide any tax reimbursement payments (including “gross-ups”) to our executive officers on any perquisites or other personal benefits.
|
û
|
No Gross-Up Payments on Post-Employment Compensation Arrangements. We do not provide any tax reimbursement payments (including “gross-ups”) on payments or benefits contingent upon a change in control of the Company.
|
û
|
No Stock Option Re-pricing. We do not permit options to purchase shares of our common stock to be re-priced to a lower exercise price without the approval of our stockholders. We have never repriced our stock options.
|
û
|
No Evergreen Provisions. The 2017 Equity Plan does not contain an annual “evergreen” provision that increases the number of shares available for issuance each year. The 2017 Equity Plan authorizes a fixed number of shares, so that stockholder approval is required to increase the maximum number of shares that may be issued subject to awards under the 2017 Equity Plan.
|
COMPENSATION PHILOSOPHY AND OBJECTIVES
|
|
|
EXECUTIVE COMPENSATION
|
•
|
attracts and retains the best executive talent;
|
•
|
appropriately aligns our business objectives and stockholder interests;
|
•
|
maintains a reasonable balance across types and purposes of compensation, particularly with respect to fixed compensation objectives, short-term and long-term performance-based objectives and retention objectives;
|
•
|
motivates our executive officers to achieve our annual and long-term strategic goals and rewards performance based on the attainment of such goals;
|
•
|
appropriately considers risk and reward in the context of our business environment and long-range business plans;
|
•
|
recognizes individual value and contributions to our success;
|
•
|
considers but does not exclusively rely upon competitive market data; and
|
•
|
supports our succession planning objectives.
|
Type
|
|
Component
|
|
Objective
|
|
Fixed Compensation
|
|
Base Salary
|
|
l
|
Attract and retain talent
|
|
|
|
|
l
|
Motivate strong business performance without encouraging excessive risk-taking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-Based
|
|
Cash Incentives
|
|
l
|
Attract and retain talent
|
Compensation
|
|
|
|
l
|
Drive the achievement of key business results on an annual or multi-year basis
|
|
|
|
l
|
Recognize individuals based on their contributions
|
|
|
|
|
l
|
Performance-based and not guaranteed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Awards
|
|
l
|
Attract and retain talent
|
|
|
|
|
l
|
Drive the achievement of key long-term business results on an annual or multi-year basis
|
|
|
|
l
|
Directly tie the interests of executive officers to the interests of our stockholders
|
|
|
|
|
l
|
Recognize individuals based on their continued contributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GOVERNANCE OF EXECUTIVE COMPENSATION PROGRAM
|
|
|
EXECUTIVE COMPENSATION
|
•
|
our performance against the financial, operational and strategic objectives established by the Compensation Committee and our Board;
|
•
|
each individual executive officer’s skills, experience, and qualifications relative to other similarly-situated executives at the companies in our compensation peer group;
|
•
|
the scope of each executive officer’s role compared to other similarly-situated executives at the companies in our compensation peer group;
|
•
|
the performance of each individual executive officer, based on a subjective assessment of his or her contributions to our overall performance, ability to lead his or her business unit or function, and work as part of a team, all of which reflect our core values;
|
•
|
compensation parity among our executive officers;
|
•
|
our financial performance relative to our compensation and performance peers;
|
•
|
feedback from our investor outreach programs; and
|
•
|
with respect to his direct reports, the recommendations of our CEO.
|
|
|
EXECUTIVE COMPENSATION
|
•
|
consulting with the Compensation Committee chairperson and other members between Compensation Committee meetings;
|
•
|
providing competitive market data based on the compensation peer group for our executive officer positions and evaluating how the compensation we pay our executive officers compares both to our performance and to how the companies in our compensation peer group compensate their executives;
|
•
|
reviewing and analyzing the base salary levels, annual cash bonus opportunities, and LTI compensation opportunities of our executive officers;
|
•
|
assessing executive compensation trends within our industry, and providing updates on corporate governance and regulatory issues and developments;
|
•
|
reviewing the Compensation Discussion & Analysis in this Proxy Statement; and
|
•
|
assessing compensation risk to determine whether our compensation policies and practices are reasonably likely to have a material adverse impact on the Company.
|
ABIOMED, Inc.
|
|
Hill-Rom Holdings, Inc.
|
|
OSI Systems, Inc.
|
Align Technology, Inc.
|
|
Hologic, Inc.
|
|
Penumbra, Inc.
|
Cooper Companies, Inc.
|
|
ICU Medical, Inc.
|
|
ResMed, Inc.
|
DENTSPLY SIRONA, Inc.
|
|
Integra LifeSciences Holdings Corp.
|
|
Teleflex, Inc.
|
Dexcom, Inc.
|
|
LivaNova PLC
|
|
Varian Medical Systems, Inc.
|
Globus Medical, Inc.
|
|
Merit Medical Systems, Inc.
|
|
West Pharmaceutical Services, Inc.
|
Haemonetics Corp.
|
|
NuVasive, Inc.
|
|
|
INDIVIDUAL COMPENSATION ELEMENTS
|
Name
|
|
Base Salary as of
December 29, 2018
|
|
Base Salary as of
December 28, 2019
|
|
Percentage
Change
|
|||||
Joe Kiani
|
|
$
|
1,092,728
|
|
|
$
|
1,125,510
|
|
|
3.0
|
%
|
Micah Young
|
|
401,500
|
|
|
429,605
|
|
|
7.0
|
|
||
Bilal Muhsin
|
|
447,784
|
|
|
550,000
|
|
|
22.8
|
|
||
Tom McClenahan
|
|
415,237
|
|
|
427,694
|
|
|
3.0
|
|
||
Anand Sampath
|
|
458,946
|
|
|
458,946
|
|
|
—
|
|
(1)
|
Pursuant to the 2019 Executive Bonus Incentive Plan, payouts for achievement levels between the threshold and maximum were based on a linear interpolation between points along the funding curve.
|
Name
|
|
Base Salary as of
December 28, 2019
|
|
2019 Target
Cash Bonus
(% of Base Salary)
|
|
2019 Target
Cash Bonus
Amount
|
|
2019 Actual
Cash Bonus
Amount
|
|
2019 Award
(% of Target)
|
||||||
Joe Kiani
|
|
$
|
1,125,510
|
|
|
100%
|
|
$
|
1,125,510
|
|
|
$
|
1,508,183
|
|
|
134%
|
Micah Young
|
|
429,605
|
|
|
50
|
|
214,803
|
|
|
287,836
|
|
|
134
|
|||
Bilal Muhsin
|
|
550,000
|
|
|
50
|
|
275,000
|
|
|
368,500
|
|
|
134
|
|||
Tom McClenahan
|
|
427,694
|
|
|
50
|
|
213,847
|
|
|
286,555
|
|
|
134
|
|||
Anand Sampath
|
|
458,946
|
|
|
50
|
|
229,473
|
|
|
307,494
|
|
|
134
|
|
|
|
|
Stock Options
|
|
PSUs
|
|||||||||||||
Name
|
|
Total 2019 LTI
Target Award Value
|
|
Options to Purchase Shares
of Common Stock
(number of shares)
|
|
Options to Purchase Shares
of Common Stock
(total fair value at grant date)(1)
|
|
PSUs at Target
(number of shares granted)(3) |
|
PSUs at Target
(grant date fair value)(4)
|
|||||||||
Joe Kiani
|
|
$
|
11,999,900
|
|
|
72,355
|
|
(2)
|
$
|
2,999,997
|
|
|
$
|
67,415
|
|
|
$
|
8,999,903
|
|
Micah Young
|
|
1,199,903
|
|
|
7,235
|
|
(2)
|
299,979
|
|
|
6,741
|
|
|
899,924
|
|
||||
Bilal Muhsin
|
|
3,332,503
|
|
|
57,235
|
|
(5)
|
2,432,579
|
|
|
6,741
|
|
|
899,924
|
|
||||
Tom McClenahan
|
|
1,199,903
|
|
|
7,235
|
|
(2)
|
299,979
|
|
|
6,741
|
|
|
899,924
|
|
||||
Anand Sampath
|
|
1,199,903
|
|
|
7,235
|
|
(2)
|
299,979
|
|
|
6,741
|
|
|
899,924
|
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
(1)
|
Amounts set forth in this column reflect the grant date fair value of the option awards, computed in accordance with ASC Topic 718. All of these amounts reflect certain assumptions with respect to the option awards and do not necessarily correspond to the actual value that will be recognized by our NEOs. The actual value, if any, that may be realized from an option award is contingent upon the satisfaction of the conditions to vesting of that award, and upon the excess of the stock price over the exercise price, if any, on the date the option award is exercised. See Note 18 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 that was filed with the SEC on February 19, 2020 for a discussion of the assumptions made in determining the grant date fair value of the stock options.
|
(2)
|
The 2019 stock option awards were granted on March 15, 2019.
|
(3)
|
Reflects the target number of shares subject to PSUs, assuming all performance goals and other requirements are met. As described below, the PSUs earned will range from 50% to 200% of target based on the achievement of performance goals, which vest in the form of shares of our common stock following the conclusion of the three-year performance period.
|
(4)
|
The 2019 PSU awards were granted on March 15, 2019. The number of shares was determined by dividing the economic value by the closing stock price per share of $133.50 on the date of grant. Any calculation that results in a fractional share was rounded down to the nearest whole share.
|
(5)
|
Mr. Muhsin was granted option awards to purchase 7,235 and 50,000 shares of common stock on March 15, 2019 and May 9, 2019, respectively, vesting 20% per year over five years with an exercise price equal to the fair market value of common stock at the date the respective option was granted. The 50,000 options granted to Mr. Muhsin on May 9, 2019 were awarded in connection with his promotion to Chief Operating Officer, changes in the executive team’s reporting structure, realignment of management functions and annual performance achievement.
|
LTI Award Type
|
|
Purpose
|
|
Performance Goal(s)
|
|
Vesting Terms
|
Stock options
(25% of total target value)
|
|
Retain and reward executives for driving long-term stockholder value
|
|
Increase in stockholder value
(market valuation) |
|
Vest annually over a five year period (20% per year)
|
PSUs
(75% of total target value)
|
|
Retain and reward executives for the achievement of multi-year performance goals
|
|
2021 Adjusted Product Revenue2 and
2021 Adjusted Non-GAAP Operating Margin2
|
|
Vest in 2022 with opportunity that ranges from 50% - 200%
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
OTHER COMPENSATION POLICIES AND PRACTICES
|
•
|
based on erroneous data;
|
•
|
received during the three-year period preceding the date on which we become required to prepare an accounting restatement; and
|
•
|
in excess of what would have been paid if calculated under the restatement.
|
TAX AND ACCOUNTING CONSIDERATIONS
|
COMPENSATION COMMITTEE REPORT
|
|
Compensation Committee
|
|
Mr. Craig Reynolds
|
|
Mr. Thomas Harkin
|
|
Mr. Adam Mikkelson
|
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
|
|
|
EXECUTIVE COMPENSATION
|
SUMMARY COMPENSATION TABLE
|
Name and Principal Position(s)
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock
Awards(1)
|
|
Option
Awards(1) |
|
Non-Equity
Incentive Plan Compensation(2) |
|
All Other
Compensation |
|
Total
|
||||||||||||||
Joe Kiani
|
|
2019
|
|
$
|
1,109,119
|
|
|
$
|
—
|
|
|
$
|
8,999,903
|
|
|
$
|
2,999,997
|
|
|
$
|
1,508,183
|
|
|
$
|
378,899
|
|
(3)
|
$
|
14,996,101
|
|
Chief Executive Officer & Chairman of the Board
|
|
2018
|
|
1,139,855
|
|
|
—
|
|
|
8,999,934
|
|
|
2,984,635
|
|
|
1,595,383
|
|
|
327,349
|
|
|
15,047,156
|
|
|||||||
|
|
2017
|
|
1,045,450
|
|
|
—
|
|
|
9,087,000
|
|
|
2,845,199
|
|
|
1,060,900
|
|
|
152,306
|
|
|
14,190,855
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Micah Young
|
|
2019
|
|
415,553
|
|
|
—
|
|
|
899,924
|
|
|
299,979
|
|
|
287,836
|
|
|
9,984
|
|
(4)
|
1,913,276
|
|
|||||||
Executive Vice President, Chief Financial Officer
|
|
2018
|
|
383,250
|
|
|
—
|
|
|
899,933
|
|
|
298,458
|
|
|
293,095
|
|
|
4,390
|
|
|
1,879,126
|
|
|||||||
|
|
2017
|
|
77,212
|
|
|
—
|
|
|
—
|
|
|
1,397,802
|
|
|
—
|
|
|
300,000
|
|
|
1,775,014
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bilal Muhsin(5)
|
|
2019
|
|
514,618
|
|
|
—
|
|
|
899,924
|
|
|
2,432,579
|
|
|
368,500
|
|
|
9,390
|
|
(6)
|
4,225,011
|
|
|||||||
Chief Operating Officer
|
|
2018
|
|
432,360
|
|
|
55,000
|
|
|
899,933
|
|
|
298,458
|
|
|
326,882
|
|
|
12,151
|
|
|
2,024,784
|
|
|||||||
|
|
2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Tom McClenahan
|
|
2019
|
|
421,466
|
|
|
—
|
|
|
899,924
|
|
|
299,979
|
|
|
286,555
|
|
|
10,029
|
|
(7)
|
1,917,953
|
|
|||||||
Executive Vice President, General Counsel & Corporate Secretary
|
|
2018
|
|
409,190
|
|
|
—
|
|
|
899,933
|
|
|
298,458
|
|
|
303,123
|
|
|
9,641
|
|
|
1,920,345
|
|
|||||||
|
|
2017
|
|
397,271
|
|
|
—
|
|
|
908,700
|
|
|
284,520
|
|
|
201,571
|
|
|
8,250
|
|
|
1,800,312
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Anand Sampath
|
|
2019
|
|
458,946
|
|
|
—
|
|
|
899,924
|
|
|
299,979
|
|
|
307,494
|
|
|
8,400
|
|
(8)
|
1,974,743
|
|
|||||||
Executive Vice President, Operations & Clinical Research
|
|
2018
|
|
452,262
|
|
|
—
|
|
|
899,933
|
|
|
298,458
|
|
|
335,031
|
|
|
9,326
|
|
|
1,995,010
|
|
|||||||
|
|
2017
|
|
439,089
|
|
|
—
|
|
|
908,700
|
|
|
284,520
|
|
|
222,789
|
|
|
7,950
|
|
|
1,863,048
|
|
|
|
EXECUTIVE COMPENSATION
|
(1)
|
Amounts set forth in the “Stock Awards” and “Option Awards” columns for 2017, 2018 and 2019 reflect the grant date fair value of stock and option awards granted in the year indicated, computed in accordance with ASC Topic 718. These amounts reflect certain assumptions with respect to the stock and option awards and do not necessarily correspond to the actual value that will be recognized by the NEOs. The actual value, if any, that may be realized from a stock award or an option award is contingent upon the satisfaction of the conditions to vesting in that award, and, in the case of option awards, upon the excess of the stock price over the exercise price, if any, on the date the option award is exercised. See Note 18 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 that was filed with the SEC on February 19, 2020 for a discussion of the grant date fair value of the stock awards and the assumptions made in determining the grant date fair value of the PSUs, RSUs and stock options granted in fiscal years 2017, 2018 and 2019. For PSUs, amounts reflect the target number of shares subject to the PSUs, assuming all performance goals and other requirements are met. As described below, the PSUs earned will range from 50% to 200% of target based on the achievement of performance goals, which vest in the form of shares of our common stock following the conclusion of the three-year performance period. The maximum potential value of the PSUs (assuming 200% of target, the maximum potential value of the award) granted to each of our NEOs was as follows: Mr. Kiani: $17,999,867 and Messrs. Young, Muhsin, McClenahan and Sampath: $1,799,865.
|
(2)
|
All amounts for fiscal 2019, 2018 and 2017 were paid pursuant to our Executive Bonus Incentive Plan.
|
(3)
|
Consists of $8,400 in retirement savings plan matching contributions, $1,000 in employer HSA contributions, $166,010 related to the net incremental costs of certain lodging, meals and other travel-related expenses incurred by his family and household members accompanying him during certain business travel pursuant to Mr. Kiani’s employment agreement (see “—Employment Arrangements with Named Executive Officers—Employment Agreement with Mr. Kiani” on page 77 of this Proxy Statement), and $203,489 related to certain incremental costs for security personnel and security services provided to Mr. Kiani and his family at his personal residence or other non-Masimo facilities that were not directly-related to Masimo business. We have established a security program for Mr. Kiani that provides physical and personal security services as they may, from time to time, be deemed necessary. This security program is not limited to providing security services only at business facilities or functions or during business-related travel and can include providing security services during certain non-business occasions, including at his primary residence and during personal travel. We do not consider any such security services to be personal benefits as the requirement for this occasional security is directly the result of Mr. Kiani’s role as our CEO and as our CEO, his personal safety is vital to our continued success.
|
(4)
|
Consists of $8,400 in retirement savings plan matching contributions, $1,000 in employer HSA contributions and $584 of personal travel related expenses.
|
(5)
|
Mr. Muhsin was promoted to Executive Vice President, Engineering, Marketing & Regulatory Affairs effective March 1, 2018, and to Chief Operating Officer effective May 6, 2019.
|
(6)
|
Consists of $8,400 in retirement savings plan matching contributions and $990 of personal travel related expenses.
|
(7)
|
Consists of $8,400 in retirement savings plan matching contributions, $1,000 in employer HSA contributions and $629 of personal travel related expenses.
|
(8)
|
Consists of $8,400 in retirement savings plan matching contributions.
|
|
|
EXECUTIVE COMPENSATION
|
GRANTS OF PLAN-BASED AWARDS DURING FISCAL YEAR 2019
|
|
|
Estimated Possible Payout Under
Non-Equity Incentive Plan Awards(1) |
|
Estimated Future Payouts Under
Equity Incentive Plan Awards(2) |
|
All Other
Option Awards: Number of Shares of Stock or Units (#)(3) |
|
Exercise Price
Per Share ($/Sh) |
|
Grant Date
Fair Value of Stock and Option Awards ($)(4) |
||||||||||||||||||||||||
Name
|
|
Grant Date
|
|
Threshold
($) |
|
Target
($) |
|
Maximum
($) |
|
Threshold
(#) |
|
Target
(#) |
|
Maximum
(#) |
|
|||||||||||||||||||
Joe Kiani
|
|
March 15, 2019
|
|
$
|
—
|
|
|
$
|
1,092,728
|
|
|
$
|
2,185,456
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
33,707
|
|
|
67,415
|
|
|
134,830
|
|
|
—
|
|
|
—
|
|
|
8,999,903
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
72,355
|
|
|
133.50
|
|
|
2,999,997
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Micah Young
|
|
March 15, 2019
|
|
—
|
|
|
200,750
|
|
|
401,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,370
|
|
|
6,741
|
|
|
13,482
|
|
|
—
|
|
|
—
|
|
|
899,924
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
299,979
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Bilal Muhsin
|
|
March 15, 2019
|
|
—
|
|
|
223,892
|
|
|
447,784
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,370
|
|
|
6,741
|
|
|
13,482
|
|
|
—
|
|
|
—
|
|
|
899,924
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
299,979
|
|
|||||
|
|
May 9, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
(5)
|
140.23
|
|
|
2,132,600
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Tom McClenahan
|
|
March 15, 2019
|
|
—
|
|
|
207,618
|
|
|
415,236
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,370
|
|
|
6,741
|
|
|
13,482
|
|
|
—
|
|
|
—
|
|
|
899,924
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
299,979
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Anand Sampath
|
|
March 15, 2019
|
|
—
|
|
|
229,473
|
|
|
458,946
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,370
|
|
|
6,741
|
|
|
13,482
|
|
|
—
|
|
|
—
|
|
|
899,924
|
|
|||||
|
|
March 15, 2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
299,979
|
|
|
|
EXECUTIVE COMPENSATION
|
(1)
|
Represents possible payments under the Executive Bonus Incentive Plan based on the base salary in effect for each NEO as of March 15, 2019, the grant date of the award. The fiscal 2019 Executive Bonus Incentive Plan provided that amounts payable thereunder would be based on the base salary in effect for each NEO as of the end of fiscal 2019, and actual payouts were therefore based on base salaries as of the end of fiscal 2019.
|
(2)
|
For fiscal 2019, the Compensation Committee selected fiscal 2021 Adjusted Product Revenue2 and fiscal 2021 Adjusted Non-GAAP Operating Margin2 as the performance measures for the target PSU award percentages, each weighted equally. If performance objectives are achieved, the PSUs will vest on the date of the approval by the Audit Committee of the audit of our financial statements for fiscal 2021 (or such later date determined by the Compensation Committee).
|
(3)
|
This option vests over a five-year period, with 20% of the shares subject to the option vesting on each anniversary of the grant date.
|
(4)
|
For PSUs, amounts reflect the fair value of the award as of the grant date assuming achievement of the “target” performance achievement level. For stock options, amounts reflect the fair value per share as of the grant date of the award multiplied by the number of shares granted. Regardless of the value on the grant date, the actual value will depend on the market value of our common stock on a date in the future when an award vests or stock option is exercised. As described below, the PSUs earned will range from 50% - 200% of target based on the achievement of performance goals, which vests in the form of shares of our common stock following the conclusion of the three-year performance period. The maximum potential value of the PSUs (assuming 200% of target, the maximum potential value of the award) granted to each of our NEOs was as follows: Mr. Kiani: $17,999,805 and Messrs. Young, Muhsin, McClenahan and Sampath: $1,799,847.
|
(5)
|
This option was awarded to Mr. Muhsin in connection with his promotion to Chief Operating Officer.
|
2
|
Non-GAAP financial measure - please see Appendix B to this Proxy Statement for a description of the adjustments and a reconciliation to the corresponding GAAP financial measure.
|
OUTSTANDING EQUITY AWARDS AT DECEMBER 28, 2019
|
|
|
Option Awards(1)
|
|
Stock Awards
|
|
||||||||||||||||||
Name
|
|
Grant Date
|
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
|
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) |
|
||||||||
Joe Kiani
|
|
2/22/2011
|
|
159,656
|
|
|
—
|
|
|
$
|
30.06
|
|
|
2/22/2021
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
10/27/2011
|
|
300,000
|
|
|
—
|
|
|
20.19
|
|
|
10/27/2021
|
|
|
—
|
|
|
—
|
|
|
||
|
|
5/28/2013
|
|
300,000
|
|
|
—
|
|
|
21.97
|
|
|
5/28/2023
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/18/2014
|
|
300,000
|
|
|
—
|
|
|
28.03
|
|
|
2/18/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/15/2015
|
|
240,000
|
|
|
60,000
|
|
|
38.76
|
|
|
6/15/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
11/4/2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,700,000
|
|
(3)
|
430,623,000
|
|
|
||
|
|
2/29/2016
|
|
180,000
|
|
|
120,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/5/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
(4)
|
9,569,400
|
|
|
||
|
|
6/5/2017
|
|
40,000
|
|
|
60,000
|
|
|
90.87
|
|
|
6/5/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
103,507
|
|
(5)
|
16,508,331
|
|
|
||
|
|
3/16/2018
|
|
20,872
|
|
|
83,490
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67,415
|
|
(6)
|
10,752,018
|
|
|
||
|
|
3/15/2019
|
|
72,355
|
|
|
—
|
|
|
133.50
|
|
|
3/15/2029
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Micah Young
|
|
10/16/2017
|
|
10,000
|
|
|
30,000
|
|
|
84.97
|
|
|
10/16/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(7)
|
1,650,722
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
8,349
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,741
|
|
(8)
|
1,075,122
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
3/15/2029
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Bilal Muhsin
|
|
8/20/2014
|
|
2,000
|
|
|
—
|
|
|
21.69
|
|
|
8/20/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
5/13/2015
|
|
30,000
|
|
|
10,000
|
|
|
34.51
|
|
|
5/13/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/29/2016
|
|
18,000
|
|
|
12,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
8/14/2017
|
|
12,000
|
|
|
18,000
|
|
|
85.54
|
|
|
8/14/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(7)
|
1,650,722
|
|
|
||
|
|
3/16/2018
|
|
2,087
|
|
|
8,349
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,741
|
|
(8)
|
1,075,122
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
3/15/2029
|
|
|
—
|
|
|
—
|
|
|
||
|
|
5/9/2019
|
|
—
|
|
|
50,000
|
|
|
140.23
|
|
|
5/9/2029
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards(1)
|
|
Stock Awards
|
|
||||||||||||||||||
Name
|
|
Grant Date
|
|
Number of
Securities Underlying Unexercised Options (#) Exercisable |
|
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
|
Option
Exercise Price ($) |
|
Option
Expiration Date |
|
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) |
|
||||||||
Tom McClenahan
|
|
4/25/2013
|
|
13,000
|
|
|
—
|
|
|
$
|
19.72
|
|
|
4/25/2023
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
2/18/2014
|
|
12,000
|
|
|
—
|
|
|
28.03
|
|
|
2/18/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/20/2015
|
|
18,000
|
|
|
6,000
|
|
|
31.01
|
|
|
3/20/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/29/2016
|
|
18,000
|
|
|
12,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/5/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,000
|
|
(9)
|
956,940
|
|
|
||
|
|
6/5/2017
|
|
4,000
|
|
|
6,000
|
|
|
90.87
|
|
|
6/5/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(7)
|
1,650,722
|
|
|
||
|
|
3/16/2018
|
|
2,087
|
|
|
8,349
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
|
|
|
|
||||
|
|
3/15/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,741
|
|
(8)
|
1,075,122
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
3/15/2029
|
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Anand Sampath
|
|
8/12/2014
|
|
50,000
|
|
|
—
|
|
|
21.77
|
|
|
8/12/2024
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/20/2015
|
|
9,000
|
|
|
6,000
|
|
|
31.01
|
|
|
3/20/2025
|
|
|
—
|
|
|
—
|
|
|
||
|
|
2/29/2016
|
|
18,000
|
|
|
12,000
|
|
|
37.84
|
|
|
2/28/2026
|
|
|
—
|
|
|
—
|
|
|
||
|
|
6/5/2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,000
|
|
(9)
|
956,940
|
|
|
||
|
|
6/5/2017
|
|
4,000
|
|
|
6,000
|
|
|
90.87
|
|
|
6/5/2027
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/16/2018
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,350
|
|
(7)
|
1,650,722
|
|
|
||
|
|
3/16/2018
|
|
2,087
|
|
|
8,349
|
|
|
86.95
|
|
|
3/16/2028
|
|
|
—
|
|
|
—
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,741
|
|
(8)
|
1,075,122
|
|
|
||
|
|
3/15/2019
|
|
—
|
|
|
7,235
|
|
|
133.50
|
|
|
3/15/2029
|
|
|
—
|
|
|
—
|
|
|
(1)
|
For each NEO, the shares listed in this table are subject to a single stock option award carrying the varying exercise prices as set forth herein. The shares subject to each stock option vest over a five-year period, with 20% of the shares subject to the option vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable. The option awards remain exercisable until they expire ten years from the date of grant subject to earlier expiration following termination of employment.
|
(2)
|
Represents the market value of the unvested shares underlying the RSUs and PSUs as of December 28, 2019, based on the closing price of our common stock, as reported on the Nasdaq Global Select Market, was $159.49 per share on December 27, 2019, the last trading day of fiscal 2019.
|
(3)
|
Represents an award of 2.7 million RSUs with contingent vesting granted to Mr. Kiani in November 2015 in connection with the amendment and restatement of his employment agreement.
|
(4)
|
Represents an award of 60,000 RSUs, vesting over a five-year period, with 20% of the units subject to Masimo common stock vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable.
|
(5)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was 103,507 shares and the grant date fair value of such 103,507 shares was $16,508,331. The maximum number of shares issuable pursuant to this PSU award was 207,014 shares and the grant date fair value of such 207,014 shares was $17,999,867.
|
(6)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was 67,415 shares and the grant date fair value of such 67,415 shares was $10,752,018. The maximum number of shares issuable pursuant to this PSU award was 134,830 shares and the grant date fair value of such 134,830 shares was $8,999,903.
|
(7)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was 10,350 shares and the grant date fair value of such 10,350 shares was $1,650,722. The maximum number of shares issuable pursuant to this PSU award was 20,700 shares and the grant date fair value of such 20,700 shares was $1,799,865.
|
(8)
|
Represents the target number of shares issuable pursuant to this PSU award. The target number of shares issuable pursuant to this PSU award was 6,741 shares and the grant date fair value of such 6,741 shares was $1,075,122. The maximum number of shares issuable pursuant to this PSU award was 13,482 shares and the grant date fair value of such 13,482 shares was $899,924.
|
(9)
|
Represents an award of 6,000 RSUs, vesting over a five-year period, with 20% of the units subject to Masimo common stock vesting on each anniversary of the grant date, with partial or full vesting under certain circumstances upon a change in control of Masimo or various events specified in the NEO’s employment agreement or severance agreement, if applicable.
|
OPTIONS EXERCISES AND STOCK VESTED DURING FISCAL 2019
|
|
|
Option Awards
|
|
Stock awards
|
||||||||||
Name
|
|
Number of Shares
Acquired on
Exercise (#)
|
|
Value Realized
on Exercise ($)(1)
|
|
Number of Shares
Acquired on Vesting (#) |
|
Value Realized
on Vesting ($)(2)
|
||||||
Joe Kiani
|
|
140,344
|
|
|
$
|
17,251,026
|
|
|
20,000
|
|
|
$
|
2,110,400
|
|
Micah Young
|
|
12,087
|
|
|
782,126
|
|
|
—
|
|
|
—
|
|
||
Bilal Muhsin
|
|
23,000
|
|
|
2,572,930
|
|
|
—
|
|
|
—
|
|
||
Tom McClenahan
|
|
10,000
|
|
|
1,385,070
|
|
|
2,000
|
|
|
211,040
|
|
||
Anand Sampath
|
|
75,000
|
|
|
8,081,369
|
|
|
2,000
|
|
|
211,040
|
|
(1)
|
The value realized equals the excess of the sale price of our common stock at the date of exercise over the option exercise price, multiplied by the number of shares for which the option was exercised.
|
(2)
|
The value realized equals the closing sale price of our common stock as reported by Nasdaq at the date of vesting multiplied by the number of shares which were granted.
|
EMPLOYMENT ARRANGEMENTS WITH NAMED EXECUTIVE OFFICERS
|
•
|
Eligibility to receive a base salary of $1,000,000 per year, which is subject to adjustment by our Board or the Compensation Committee, and was adjusted to $1,125,510 per year in July 2019.
|
•
|
Eligibility to receive an annual bonus equal to 100% of his base salary in the event we attain certain performance criteria set by our Board or the Compensation Committee under our annual incentive plan for our executive officers. 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 will not exceed 200% of his base salary.
|
•
|
Under the Amended CEO Agreement, Mr. Kiani is eligible to receive equity awards with a value at least consistent with equity awards granted to comparable CEOs of comparable companies (taking into account revenues, market capitalization and industry). Following approval of our 2017 Equity Plan by our stockholders at the 2017 Annual Meeting, Mr. Kiani agreed that the only equity awards he may be awarded must be approved by the Compensation Committee under the 2017 Equity Plan, consisting of both PSU awards and time-based options to purchase shares of our common stock.
|
•
|
Right to participate in or receive benefits under all of our employee benefits plans and to be eligible to participate in any pension plan, profit-sharing plan, savings plan, stock option plan, life insurance, health-and-accident plan or similar arrangements made available to members of our management.
|
•
|
Reimbursement for all reasonable expenses incurred and paid by him in the course of the performance of his duties under the Amended CEO Agreement and reimbursement for all reasonable travel and lodging expenses for his family and household members in the event they accompany him during business travel, which includes travel and hospitality expenses for first class airplane travel and accommodations, including travel by private or chartered aircraft. To the extent inconsistent with the Amended CEO Agreement, Mr. Kiani is exempt from our travel and expense policy and our expense reimbursement policy.
|
•
|
If Mr. Kiani’s employment is terminated for cause, he is entitled to receive his full base salary through the date of termination.
|
•
|
If Mr. Kiani’s employment is terminated as a result of his death, his designee or estate is entitled to receive his full base salary through the date of termination and an additional amount equal to 50% of his base salary then in effect as of the date of his death for each of three consecutive years following his death, which will be paid in substantially equal monthly installments over the three-year period.
|
•
|
If Mr. Kiani’s employment is terminated as a result of his disability, he is entitled to receive his full base salary through the date of termination and an additional amount equal to 75% of his base salary then in effect for each of two consecutive years following the date of termination, which will be paid in substantially equal monthly installments over the two-year period.
|
•
|
In the event (i) we terminate Mr. Kiani’s employment other than for cause, death or disability, or (ii) Mr. Kiani terminates his employment with us for Good Reason (each, a “Qualifying Termination”), Mr. Kiani will receive the following payments and benefits:
|
◦
|
payment of an amount equal to his full base salary through the date of termination, if applicable, and an additional amount equal to twice the sum of his base salary then in effect and the average annual bonus paid to him over the prior three years, which will be paid in installments over two years pursuant to our normal payroll practices; and
|
◦
|
all of his outstanding options and other equity awards will immediately vest.
|
•
|
termination for “cause” generally means his termination of employment as a result of his willful and continued failure to substantially perform his duties under the Amended CEO Agreement, his willful engaging in gross misconduct materially injurious to us or his willful violation of the confidentiality and trade secret protection provisions contained in a restrictive covenant agreement with us if the violation results in demonstrably material injury to us. Any termination for cause must be approved by at least 75% of the entire membership of our Board.
|
•
|
termination for “Good Reason” generally means a termination of his employment by Mr. Kiani subsequent to (A) a diminution in his responsibilities, duties and authority, including him ceasing to serve as CEO of the Company or him ceasing to serve as Chairman of the Board or the designation of any director other than him as the lead director of the Board, (B) any reduction in his rate of compensation or fringe benefits, (C) Masimo’s failure to comply with certain obligations relating to his compensation or place of work, (D) the provision of a notice not to renew the Amended CEO Agreement by Masimo, or (E) (1) a change in control (as defined below) 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, (i) the highest level of 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 company, (ii) he does not become the, or is removed from the position of, CEO and Chairman of the Board of the Acquirer Parent, with such position being on terms and conditions reasonably acceptable to him, provided that the 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 shall be deemed to be reasonable, or (iii) any other director is designated the lead director of the board of directors of the Acquirer Parent; provided that, in the case of clauses (A), (B), (C) and (E) above, “Good Reason” will not be deemed to exist unless certain notice and cure period conditions are met and his resignation for Good Reason is effective within thirty days after the expiration of the cure period.
|
•
|
a “change in control” generally means (i) the acquisition by any person or group of more than 35% of our outstanding voting stock, (ii) the acquisition of our assets that have a total fair market value of 40% or more of the total fair market value of all of our assets immediately before the acquisition by any person or group, or (iii) a change in more than one third of the directors on our Board during a rolling 24-month period. For purposes of determining whether a change in control has occurred, a director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to, a consent solicitation, relating to the election of directors of the Company) whose election by the Board or whose nomination for election by the stockholders of the Company was approved by a vote of at least a majority of the directors then in office either who were directors at the beginning of such period or whose election or nomination for election was previously so approved will be treated as a member of the Board at the beginning of the 24-month period.
|
•
|
the participant must execute, within 60 days of termination, a general release of claims (which becomes irrevocable within such 60-day period), a non-disparagement agreement, an intellectual property nondisclosure agreement, and a non-competition agreement that covers the period during which the participant is receiving severance benefits;
|
•
|
a participant entitled to the basic benefit must not have received any change in control severance benefits under the Severance Plan or any severance benefits equal to, or better than, the basic severance benefits pursuant to another arrangement between the participant and us;
|
•
|
a participant entitled to the change in control benefit must not have received any basic severance benefits under the Severance Plan or any severance benefits equal to, or better than, the change in control severance benefits pursuant to another arrangement between the participant and us; and
|
•
|
the participant must waive any and all rights, benefits and privileges to severance benefits that he might otherwise be entitled to receive under any other oral or written plan, employment agreement, or arrangement with us.
|
•
|
an amount equal to annual salary determined at the highest rate in effect during the one-year period immediately prior to the date of termination, paid in installments according to normal payroll practices over 12 months commencing within 60 days following the participant’s termination;
|
•
|
COBRA continuation coverage at Company expense during the 12 months following termination; and
|
•
|
the right to purchase life insurance through the Company during the 12 month period following his termination.
|
•
|
if the participant has a covered termination because his current job is not offered to him on the date of the change in control, the participant will receive (i) an amount equal to his annual salary determined at the highest rate in effect during the one-year period immediately prior to the date of the covered termination, plus the average annual bonus paid to him over the three-year period prior to the change in control, and (ii) life insurance for the 12-month period following his termination;
|
•
|
if the participant has a covered termination for a reason not described in the preceding clause, instead of one times base salary, he will receive two times base salary;
|
•
|
the participant will receive COBRA continuation coverage at Company expense during the 12-month period following his termination; and
|
(1)
|
Mr. Young is not currently entitled to any Basic Severance Benefits under the Severance Plan. In addition, Mr. Young’s Change in Control Severance Benefits under the Severance Plan are currently limited to the acceleration of 50% of his unvested stock options and other equity-based awards upon a covered termination on or after a change in control.
|
•
|
upon the change in control, 50% of the participant’s unvested stock options and other equity-based awards shall be fully accelerated as of the change in control and 100% of the unvested stock options and other equity-based awards shall be fully accelerated upon the participant’s termination under circumstances that entitle him to change in control severance benefits noted above.
|
•
|
“cause” generally means the participant’s: (i) refusal or failure to perform his duties with us or to comply in all respects with our policies or the policies of any affiliate of ours after notice of a deficiency and failure to cure the deficiency within three business days following notice from us, unless he has delivered a bona fide notice of termination for Good Reason to us, and the reason for the termination has not been cured by us within 30 days of receipt of notice; (ii) engagement in illegal or unethical conduct that could be injurious to us or our affiliates; (iii) commitment of one or more acts of dishonesty; (iv) failure to follow a lawful directive from our CEO; or (v) indictment for any felony, or any misdemeanor involving dishonesty or moral turpitude.
|
•
|
“change in control” generally means: (i) a merger or consolidation or a sale of all or substantially all of our assets unless more than 50% of the voting securities of the surviving or acquiring entity are held by our stockholders as of immediately prior to the transaction; (ii) the approval by our stockholders of the sale of all or substantially all of our assets; or (iii) without the prior approval of our Board, the acquisition by any person or group of securities representing beneficial ownership of 50% or more of our outstanding voting securities.
|
•
|
“Good Reason” generally means, provided that the executive has provided us with notice of one of the following events within 15 days after it occurs, and we fail to cure the event within 30 days after receiving notice from the executive: (i) any material reduction by us in the participant’s annual salary; (ii) any requirement that the participant change his principal location of work to any location that is more than 40 miles from the address of our current principal executive offices; or (iii) any material change in the participant’s responsibilities.
|
|
|
Termination
|
|
|
||||||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Equity Awards |
|
Upon Death
|
|
Upon
Disability |
|
By Masimo
Without Cause or by Mr. Kiani for Good Reason |
|
Change In
Control (CIC)
Without Termination and Two Years
Post-CIC Continuous Service
|
||||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
—
|
|
|
593,434
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Value of Equity Award Shares Accelerated(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
65,409,287
|
|
|
$
|
—
|
|
Special Payment - Value of Award Shares Vesting(2)(3)
|
|
—
|
|
|
—
|
|
|
430,623,000
|
|
|
430,623,000
|
|
||||
Special Payment - Cash Payment(4)(5)
|
|
—
|
|
|
—
|
|
|
35,000,000
|
|
|
35,000,000
|
|
||||
Other Cash Payments
|
|
1,688,265
|
|
|
1,688,265
|
|
|
5,027,331
|
|
|
—
|
|
||||
Continuation of Benefits(6)
|
|
20,626
|
|
|
20,626
|
|
|
20,626
|
|
|
—
|
|
||||
Total Cash Benefits and Payments
|
|
$
|
1,708,891
|
|
|
$
|
1,708,891
|
|
|
$
|
536,080,244
|
|
|
$
|
465,623,000
|
|
(1)
|
Consists of the value of in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Kiani as of December 28, 2019, the vesting of which would be accelerated.
|
(2)
|
Upon the qualifying event, all of the Award Shares subject to the RSU award granted to Mr. Kiani under the Amended CEO Agreement will become vested. The amount represents the value of 100% of the Award Shares subject to the RSU award based on the closing stock price of $159.49 per share.
|
(3)
|
Subject to Mr. Kiani’s continuous employment following a Change in Control, 50% of the Award Shares will vest on each of the first two anniversaries of such Change in Control. The amount represents the value of the Award Shares subject to the RSU award based on the closing stock price of $159.49 per share.
|
(4)
|
Upon the qualifying event, we will pay to Mr. Kiani the Cash Payment as consideration for his agreement to comply with certain non-competition and non-solicitation obligations under a non-competition and confidentiality agreement between Masimo and Mr. Kiani, and will be subject to repayment to Masimo if Mr. Kiani materially breaches any of such obligations.
|
(5)
|
Subject to Mr. Kiani’s continuous employment following a Change in Control, 50% of the Cash Payment will vest and become payable on each of the first two anniversaries of such Change in Control.
|
(6)
|
Presumes a remaining term of one year. Comprised of the cash equivalent of our cost of standard employee benefits, including health, dental and vision insurance for Mr. Kiani and his eligible dependents for 12 months, and life, accidental death and dismemberment and long-term disability insurance for Mr. Kiani for 12 months.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Equity Awards
|
|
By Masimo
Without
Cause Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. Young for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
31,338
|
|
|
—
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated(1)
|
|
$
|
—
|
|
|
$
|
3,360,495
|
|
(1)
|
$
|
—
|
|
|
Cash Payments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Continuation of Benefits
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
—
|
|
|
$
|
3,360,495
|
|
|
$
|
—
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Young as of December 28, 2019, the vesting of which would be accelerated.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Equity Awards
|
|
By Masimo
Without
Cause Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. Muhsin for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
122,685
|
|
|
61,343
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
8,524,813
|
|
(1)
|
$
|
4,262,406
|
|
(2)
|
Cash Payments
|
|
550,000
|
|
|
1,408,283
|
|
|
—
|
|
|
|||
Continuation of Benefits(3)
|
|
27,463
|
|
(4)
|
29,191
|
|
(5)
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
577,463
|
|
|
$
|
9,962,287
|
|
|
$
|
4,262,406
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Muhsin as of December 28, 2019, the vesting of which would be accelerated.
|
(2)
|
Consists of the value of 50% of the in-the-money stock options and 50% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Muhsin as of December 28, 2019, the vesting of which would be accelerated.
|
(3)
|
Assumes that Mr. Muhsin does not commence employment with another employer during the period from December 29, 2019 through January 2, 2021.
|
(4)
|
Comprised of health, dental and vision insurance benefits for Mr. Muhsin and his eligible dependents for 12 months.
|
(5)
|
Comprised of health, dental and vision insurance benefits for Mr. Muhsin and his eligible dependents for 12 months and life insurance for Mr. Muhsin for 12 months.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Equity Awards
|
|
By Masimo
Without
Cause Outside
a Change In
Control
|
|
By Masimo
Without Cause or
by Mr. McClenahan for
Good Reason in
Connection with
a Change In
Control
|
|
Change In
Control
Without Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
59,342
|
|
|
29,671
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
6,587,224
|
|
(1)
|
$
|
3,293,612
|
|
(2)
|
Cash Payments
|
|
427,694
|
|
|
1,118,393
|
|
|
—
|
|
|
|||
Continuation of Benefits(3)
|
|
26,728
|
|
(4)
|
28,208
|
|
(5)
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
454,422
|
|
|
$
|
7,733,825
|
|
|
$
|
3,293,612
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. McClenahan as of December 28, 2019, the vesting of which would be accelerated.
|
(2)
|
Consists of the value of 50% of the in-the-money stock options and 50% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. McClenahan as of December 28, 2019, the vesting of which would be accelerated.
|
(3)
|
Assumes that Mr. McClenahan does not commence employment with another employer during the period from December 29, 2019 through January 2, 2021.
|
(4)
|
Comprised of health, dental and vision insurance benefits for Mr. McClenahan and his eligible dependents for 12 months.
|
(5)
|
Comprised of health, dental and vision insurance benefits for Mr. McClenahan and his eligible dependents for 12 months and life insurance for Mr. McClenahan for 12 months.
|
|
|
Termination
|
|
|
|
||||||||
Executive Benefits, Payments
and Acceleration of Vesting of Equity Awards
|
|
By Masimo
Without
Cause Outside
a Change In
Control
|
|
By Masimo
Without Cause or by Mr. Sampath for Good Reason in Connection with a Change In Control |
|
Change In
Control
Without Termination
|
|
||||||
Number of Equity Award Shares Accelerated
|
|
—
|
|
|
59,342
|
|
|
29,671
|
|
|
|||
|
|
|
|
|
|
|
|
||||||
Value of Equity Award Shares Accelerated
|
|
$
|
—
|
|
|
$
|
6,587,224
|
|
(1)
|
$
|
3,293,612
|
|
(2)
|
Cash Payments
|
|
458,946
|
|
|
1,199,350
|
|
|
—
|
|
|
|||
Continuation of Benefits(3)
|
|
31,311
|
|
(4)
|
32,897
|
|
(5)
|
—
|
|
|
|||
Total Cash Benefits and Payments
|
|
$
|
490,257
|
|
|
$
|
7,819,471
|
|
|
$
|
3,293,612
|
|
|
(1)
|
Consists of the value of 100% of the in-the-money stock options and 100% of the unvested PSUs (on the basis of 100% target achievement) that were held by Mr. Sampath as of December 28, 2019, the vesting of which would be accelerated.
|
(2)
|
Consists of the value of 50% of the in-the-money stock options 50% of the unvested PSUs (on the basis of 50% target achievement) that were held by Mr. Sampath as of December 28, 2019, the vesting of which would be accelerated.
|
(3)
|
Assumes that Mr. Sampath does not commence employment with another employer during the period from December 29, 2019 through January 2, 2021.
|
(4)
|
Comprised of health, dental and vision insurance benefits for Mr. Sampath and his eligible dependents for 12 months.
|
(5)
|
Comprised of health, dental and vision insurance benefits for Mr. Sampath and his eligible dependents for 12 months and life insurance for Mr. Sampath for 12 months.
|
PAY RATIO DISCLOSURE
|
•
|
the median of the annual total compensation of all employees of our Company (other than our CEO) was $117,628; and
|
•
|
the annual total compensation of our CEO, Mr. Kiani, was $14,996,101.
|
•
|
To identify our median employee, we selected total cash compensation, which we calculated as annual base pay (using a reasonable estimate of the hours worked during 2017 for hourly employees and actual salary paid for our remaining employees) and the actual annual cash incentive awards earned for fiscal 2017, as the compensation measure to be used to compare the compensation of our employees as of October 31, 2017 for the 12-month period from January 1, 2017 through December 31, 2017.
|
•
|
As of October 31, 2017, our employee population consisted of approximately 1,420 individuals, with approximately 983 employees in the United States and approximately 437 employees outside the United States. In determining this population, we considered the employees of our subsidiaries and all of our worldwide employees other than our CEO, whether employed on a full-time, part-time, temporary or seasonal basis. We did not include any contractors or other non-employee workers in our employee population.
|
•
|
We annualized base pay for any full-time and part-time employees who commenced work during 2017.
|
•
|
Using this approach, we selected the individual at the median of our employee population. Our median employee was a Clinical Specialist based in the United States.
|
OWNERSHIP OF OUR STOCK
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
•
|
each person or group known to us to be the beneficial owner of more than five percent of our common stock;
|
•
|
each of our directors;
|
•
|
each of our named executive officers; and
|
•
|
all of our current directors and executive officers as a group.
|
|
|
Beneficial Ownership of
Common Stock |
||||
Name
|
|
Number of
Shares |
|
Percent of
Class(1) |
||
Named Executive Officers and Directors:
|
|
|
|
|
||
Joe Kiani(2)
|
|
5,387,401
|
|
|
9.7
|
%
|
Micah Young(3)
|
|
3,534
|
|
|
*
|
|
Bilal Muhsin(4)
|
|
93,621
|
|
|
*
|
|
Tom McClenahan(5)
|
|
78,885
|
|
|
*
|
|
Anand Sampath(6)
|
|
112,403
|
|
|
*
|
|
Steven J. Barker, Ph.D., M.D.(7)
|
|
82,245
|
|
|
*
|
|
H Michael Cohen
|
|
—
|
|
|
*
|
|
Sanford Fitch(8)
|
|
90,245
|
|
|
*
|
|
Thomas Harkin(9)
|
|
6,381
|
|
|
*
|
|
Adam Mikkelson(10)
|
|
2,996
|
|
|
*
|
|
Craig Reynolds(11)
|
|
102,996
|
|
|
*
|
|
Julie A. Shimer, Ph.D.
|
|
—
|
|
|
*
|
|
Total Shares Beneficially Owned By Current Executive Officers and Directors (15 persons)(12)
|
|
6,153,035
|
|
|
11.0
|
%
|
5% Stockholders:
|
|||||||
Joe Kiani(2)
|
|
5,387,401
|
|
|
9.7
|
%
|
|
BlackRock, Inc.(15)
|
|
6,544,721
|
|
|
12.1
|
%
|
|
The Vanguard Group(16)
|
|
4,514,303
|
|
|
8.3
|
%
|
|
FMR, LLC(17)
|
|
4,706,036
|
|
|
8.7
|
%
|
*
|
Less than one percent.
|
(1)
|
For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the sum of shares of common stock outstanding as of March 28, 2020, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after March 28, 2020.
|
(2)
|
Comprised of 159,241 shares held directly, 2,283,453 shares held in two trusts for which Mr. Kiani is the sole trustee, 1,491,209 shares held in four trusts for which Mr. Kiani is not the trustee, 9,000 shares held by an immediate family member of Mr. Kiani for which Mr. Kiani shares voting and dispositive power, options to purchase 1,434,130 shares of Masimo common stock that were exercisable as of March 28, 2020 or that have or will become exercisable within 60 days after March 28, 2020, and 10,368 shares held for the Reporting Person’s account under the Masimo Retirement Savings Plan. As of March 28, 2020, an aggregate of 400,000 shares of common stock owned by a family trust and beneficially owned by Mr. Kiani were pledged as collateral for a personal loan. See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Practices—Hedging and Pledging Policies” on page 67 of this Proxy Statement.
|
(3)
|
Comprised of options to purchase 3,534 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(4)
|
Comprised of options to purchase 93,621 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(5)
|
Comprised of 6,264 shares of common stock held directly and options to purchase 72,621 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(6)
|
Comprised of 13,782 shares of common stock held directly and options to purchase 98,621 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(7)
|
Comprised of 66,245 shares of common stock held directly and options to purchase 16,000 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(8)
|
Comprised of 44,245 shares of common stock held directly and options to purchase 46,000 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(9)
|
Comprised of 6,381 shares of common stock held directly.
|
(10)
|
Comprised of 2,996 shares of common stock held directly.
|
(11)
|
Comprised of 2,996 shares of common stock held directly and options to purchase 100,000 shares of common stock that are exercisable within 60 days after March 28, 2020.
|
(12)
|
Comprised of shares included under “Named Executive Officers and Directors”, 87,465 shares of common stock owned directly by three of our other executive officers and options to purchase an aggregate of 104,863 shares of common stock held by three of our other executive officers that are exercisable within 60 days after March 28, 2020. Subsequent to March 28, 2020, an aggregate of 65,000 shares of common stock owned by a family trust and beneficially owned by Mr. Yongsam Lee, one of the three of our other executive officers, were pledged as collateral for a personal loan. See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Practices—Hedging and Pledging Policies” on page 67 of this Proxy Statement.
|
(15)
|
BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on February 4, 2020, reporting that it had sole voting power with respect to 6,356,926 shares, sole dispositive power with respect to 6,544,721 shares, and beneficial ownership of an aggregate of 6,544,721 shares in its capacity as a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act. BlackRock’s address is 55 East 52nd Street, New York, New York 10055.
|
(16)
|
The Vanguard Group (“Vanguard”) filed a Schedule 13G/A on February 12, 2020, reporting that it had sole voting power with respect to 27,981 shares, shared voting power with respect to 12,813 shares, sole dispositive power with respect to 4,479,952 shares, shared dispositive power with respect to 34,351 shares and beneficial ownership of an aggregate of 4,514,303 shares in its capacity as an investment adviser in accordance with Rule 13d-1(b)(1)(ii)(E) under the Exchange Act. Vanguard’s address is 100 Vanguard Blvd., Malvern, PA 19355.
|
(17)
|
FMR, LLC (“FMR”) filed a Schedule 13G on February 7, 2020, reporting that it had sole voting power with respect to 347,065 shares, sole dispositive power with respect to an aggregate of 4,706,036 shares and beneficial ownership of an aggregate of 4,706,036 shares in its capacity as a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act. FMR’s address is 245 Summer Street, Boston, Massachusetts 02210.
|
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
|
Plan Category
|
|
Number of securities to be issued upon exercise
of outstanding options, warrants and rights (a)(1) |
|
Weighted-average exercise price
of outstanding options, warrants and rights(2) |
|
Number of securities
available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
||||
Equity compensation plans approved by stockholders(3)
|
|
7,623,640
|
|
|
$
|
54.23
|
|
|
3,155,124
|
|
|
Equity compensation plans not approved by stock holders(4)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
|
7,623,640
|
|
|
$
|
54.23
|
|
|
3,155,124
|
|
|
(1)
|
Includes 2,796,749 RSUs and PSUs that were unvested and outstanding as of December 28, 2019.
|
(2)
|
The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding stock options and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs and PSUs, which have no exercise price.
|
(3)
|
Comprised of the 2007 Stock Incentive Plan and the 2017 Equity Incentive Plan.
|
(4)
|
As of December 28, 2019, we did not have any equity compensation plans that were not approved by our stockholders.
|
STOCK OWNERSHIP POLICY
|
Stock Ownership Guidelines
|
|||||
|
|
|
|
|
|
|
|
||||
|
|||||
|
|||||
l
|
Reflects a market value multiple of base salary
|
||||
l
|
Reviewed annually by the Nominating, Compliance and Governance Committee
|
NON-EMPLOYEE DIRECTOR STOCK OWNERSHIP POLICY
|
ADDITIONAL INFORMATION
|
PROPOSAL:
|
|
TO ELECT TWO CLASS I DIRECTORS AS NAMED IN OUR PROXY STATEMENT
|
|||
1
|
|||||
Nominees
|
|
Term in Office
|
Julie A. Shimer, Ph.D.
|
|
Class I - Continuing in Office Until the 2020 Annual Meeting of the Stockholders
|
H Michael Cohen
|
|
Class I - Continuing in Office Until the 2020 Annual Meeting of the Stockholders
|
þ
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE.
|
||||
Current Directors
|
|
Class and Remaining Term in Office
|
Thomas Harkin
|
|
Class II - Continuing in Office Until the 2021 Annual Meeting of the Stockholders
|
Joe Kiani
|
|
Class II - Continuing in Office Until the 2021 Annual Meeting of the Stockholders
|
Adam Mikkelson
|
|
Class III - Continuing in Office Until the 2022 Annual Meeting of the Stockholders
|
Craig Reynolds
|
|
Class III - Continuing in Office Until the 2022 Annual Meeting of the Stockholders
|
PROPOSAL:
|
|
TO RATIFY THE SELECTION OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 2, 2021
|
|||
2
|
|||||
þ
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE SELECTION OF GRANT THORNTON LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING JANUARY 2, 2021.
|
||||
PROPOSAL:
|
|
TO PROVIDE AN ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
|
|||
3
|
|||||
þ
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS
DESCRIBED IN THIS PROXY STATEMENT.
|
||||
PROPOSAL:
|
|
TO APPROVE AN AMENDMENT TO OUR 2017 EQUITY INCENTIVE PLAN
|
|||
4
|
|||||
•
|
Administrator Independence. The 2017 Equity Plan will be administered by the Compensation Committee of the Board, which is comprised entirely of independent, non-employee directors (subject to the Compensation Committee’s discretion to make certain delegations of authority according to the terms of the 2017 Equity Plan).
|
•
|
Broad-Based Eligibility for Equity Awards. We grant equity awards to a broad range of our employees. By doing so, we align employee interests with those of our stockholders. Approximately 36% of all outstanding equity awards, on a share basis, as of March 30, 2020 were held by employees who are not Named Executive Officers.
|
•
|
No “Evergreen” Provision. The 2017 Equity Plan does not contain an annual “evergreen” provision that increases the number of shares available for issuance each year. The 2017 Equity Plan authorizes a fixed number of shares, so that stockholder approval is required to increase the maximum number of shares that may be issued subject to awards under the 2017 Equity Plan.
|
•
|
No Repricing Without Stockholder Approval. Stock options and stock appreciation rights granted under the 2017 Equity Plan may not be repriced without stockholder approval of an “Exchange Program”.
|
•
|
No Liberal Recycling of Shares. Shares used to pay the exercise price of an award, any shares withheld for taxes and any shares reacquired by us on the open market or otherwise using cash proceeds from the exercise of options will not be available again for grant under the 2017 Equity Plan. The 2017 Equity Plan share reserve will also be reduced by the full amount of shares exercised pursuant to stock appreciation rights, regardless of the actual number of shares issued under the award.
|
•
|
Annual Limits on Awards. The 2017 Equity Plan includes a maximum number of shares subject to awards, and a maximum value of cash awards, that could be granted or payable in each fiscal year of the Company to any individual. The 2017 Equity Plan also includes a separate maximum number of shares subject to awards that could be granted in each fiscal year of the Company to non-employee members of the Board. These maximums were originally included in order to make awards that qualify for exemption from Section 162(m), but we have determined to retain them even though the exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed.
|
•
|
Minimum Vesting. The 2017 Equity Plan includes the minimum vesting requirements described below under “Administration”, and does not provide for automatic vesting of outstanding equity awards based solely on the occurrence of a change in control unless awards are not assumed or substituted for in connection with the change in control.
|
•
|
Cancellation and Recapture of Awards. The 2017 Equity Plan permits the Administrator to reduce, cancel and/or recoup awards granted under the 2017 Equity Plan upon the occurrence of certain events such as conduct by a participant that is detrimental to the business or reputation of the Company.
|
•
|
Negative Discretion. The 2017 Equity Plan permits the Administrator to exercise negative discretion to reduce or eliminate the amount of the performance units, performance shares or performance bonuses earned by a participant if, in the Administrator’s sole discretion, such reduction or elimination is appropriate.
|
•
|
Limited Transferability. In general, awards under the 2017 Equity Plan may not be sold, pledged, assigned, transferred or otherwise encumbered by the person to whom they are granted, other than by will or by the laws of descent or distribution, unless approved by the Administrator.
|
•
|
Awards subject to Clawback. All awards are subject to the provisions of any clawback policy implemented by us, including, without limitation, any clawback policy adopted to comply with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder.
|
•
|
No Tax Gross-Ups. The 2017 Equity Plan does not provide for, or authorize, any tax gross-ups.
|
•
|
No Discounted Stock Options or Stock Appreciation Rights. The 2017 Equity Plan generally prohibits the grant of options or stock appreciation rights with an exercise or base price less than 100% of the fair market value of our common stock on the date of grant.
|
Name of Individual or Group and Position
|
|
Number of Shares
Subject to Options (#)
|
|
Average Per Share
Exercise Price ($)
|
|
Number of Shares
Subject to Restricted Stock Units
and Performance Share Units (#)
|
|
Dollar Value of Shares
Subject to Restricted Stock Units ($)(1)
and Performance Share Units ($)(2)
|
||||||
Joe Kiani, Chief Executive Officer & Chairman
|
|
72,355
|
|
|
$
|
133.50
|
|
|
67,415
|
|
|
$
|
10,752,018
|
|
Micah Young, Executive Vice President, Chief Financial Officer
|
|
7,235
|
|
|
133.50
|
|
|
6,741
|
|
|
1,075,122
|
|
||
Bilal Muhsin, Chief Operating Officer
|
|
57,235
|
|
|
136.87
|
|
|
6,741
|
|
|
1,075,122
|
|
||
Tom McClenahan, Executive Vice President, General Counsel & Corporate Secretary
|
|
7,235
|
|
|
133.50
|
|
|
6,741
|
|
|
1,075,122
|
|
||
Anand Sampath, Executive Vice President, Operations & Clinical Research
|
|
7,235
|
|
|
133.50
|
|
|
6,741
|
|
|
1,075,122
|
|
||
All current executive officers, as a group (8 persons)
|
|
173,000
|
|
|
134.25
|
|
|
114,602
|
|
|
18,277,873
|
|
||
All directors who are not executive officers, as a group
|
|
—
|
|
|
—
|
|
|
9,128
|
|
|
1,455,825
|
|
||
All employees who are not executive officers, as a group
|
|
371,441
|
|
|
139.43
|
|
|
99,549
|
|
|
15,877,070
|
|
(1)
|
For RSUs, amounts reflect the fair value of the award as of the last day of fiscal year 2019. Actual payout value will depend on the market value of our common stock on a date in the future when an award vests.
|
(2)
|
For PSUs, amounts reflect the fair value of the award as of the grant date assuming achievement of the “target” performance achievement level. Regardless of the value on the grant date, the actual value will depend on the market value of our common stock on a date in the future when an award vests or stock option is exercised. As described below, the PSUs earned will range from 50% - 200% of target based on the achievement of performance goals, which vests in the form of shares of our common stock following the conclusion of the performance period.
|
þ
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO OUR 2017 EQUITY INCENTIVE PLAN.
|
|
PROPOSAL:
|
|
TO APPROVE AN AMENDMENT TO OUR EXECTUIVE BONUS INCENTIVE PLAN
|
|||
5
|
|||||
•
|
determine the length of performance periods;
|
•
|
select the employees who will receive awards;
|
•
|
determine the target award for each participant;
|
•
|
determine the performance goals that must be achieved before any actual awards are paid;
|
•
|
determine a formula to determine the actual award (if any) payable to each participant; and
|
•
|
interpret the provisions of the Bonus Plan.
|
(1)
|
Based on the participant’s base salary in effect as of March 12, 2020, the date of grant of the award. The base salary used for purposes of calculating bonuses payable under the Bonus Plan for fiscal 2020 is expected to be greater than the base salary in effect as of March 12, 2020.
|
þ
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO OUR EXECUTIVE BONUS INCENTIVE PLAN.
|
|
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND CERTAIN CONTROL PERSONS
|
RELATED PERSON TRANSACTIONS POLICY AND PROCEDURES
|
•
|
any person who is or was a director or executive of ours since the beginning of our immediately preceding fiscal year or an immediate family member of, or person sharing a household with, any of the foregoing individuals;
|
•
|
any person known by us to be the beneficial owner of more than five percent of any class of our outstanding voting securities or, if the beneficial owner is an individual, an immediate family member of, or person sharing a household with, any of the foregoing individuals; and
|
•
|
any firm, corporation or other entity in which any of the foregoing individuals is employed or is a general partner or principal or in a similar position, or in which any of the foregoing individuals has a five percent or greater beneficial interest.
|
•
|
employment and compensation of our executive officers, subject to certain exceptions;
|
•
|
compensation of our directors, subject to certain exceptions;
|
•
|
certain transactions between us and an unrelated third party entity in which the related person’s only relationship with the third party is as an employee (other than an executive officer), director or beneficial owner of less than 10% of the other entity’s shares, subject to certain limitations;
|
•
|
certain contributions to the Masimo Foundation and certain other charitable contributions; and
|
•
|
transactions in which all of our stockholders receive the same benefit on a pro rata basis.
|
TRANSACTIONS WITH RELATED PERSONS
|
CERCACOR LABORATORIES, INC.
|
MASIMO FOUNDATION FOR ETHICS, INNOVATION AND COMPETITION IN HEALTHCARE
|
PATIENT SAFETY MOVEMENT FOUNDATION
|
INDEMNIFICATION AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
|
QUESTIONS AND ANSWERS YOU MAY HAVE ABOUT THESE PROXY MATERIALS AND VOTING
|
1. Why am I receiving these materials?
|
2. When and where will the Annual Meeting be held?
|
3. Who can vote at the Annual Meeting?
|
4. What am I voting on?
|
•
|
To elect the Class I nominees for director to serve until our 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified;
|
•
|
To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending January 2, 2021;
|
•
|
To vote on an advisory resolution to approve named executive officer compensation;
|
•
|
To approve an amendment to our 2017 Equity Incentive Plan; and
|
•
|
To approve an amendment to our Executive Bonus Incentive Plan.
|
5. Will there be any other items of business on the agenda?
|
6. What is the Masimo Board’s voting recommendation?
|
•
|
“For” each of the Class I Director nominees;
|
•
|
“For” the ratification of the selection of Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending January 2, 2021; and
|
•
|
“For” the approval of our named executive officer compensation.
|
•
|
“For” the approval of an amendment to our 2017 Equity Incentive Plan.
|
•
|
“For” the approval of an amendment to our Executive Bonus Incentive Plan.
|
7. How do I vote?
|
•
|
To vote by proxy using the enclosed proxy card, complete, sign and date your proxy card and return it promptly in the envelope provided.
|
•
|
To vote by proxy on the internet, go to www.envisionreports.com/MASI and follow the instructions set forth on the internet site.
|
•
|
To vote by proxy over the telephone, dial the toll-free telephone number listed on your proxy card under the heading “vote by telephone” using a touch-tone telephone and follow the recorded instructions.
|
8. How do I vote my Masimo shares held through the Masimo Retirement Savings Plan?
|
9. How many votes do I have?
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10. Will my vote be kept confidential?
|
11. Who is paying for this proxy solicitation?
|
12. Why did I receive a Notice of Internet Availability of Proxy Materials (the “Notice”) instead of a full set of proxy materials
|
13. What does it mean if I receive more than one Notice?
|
14. Can I change my vote after submitting my proxy?
|
•
|
You may submit another properly completed and executed proxy card with a later date;
|
•
|
You may submit a new proxy through the internet or by telephone (1-800-652-VOTE) (your latest internet or telephone instructions submitted prior to the deadline will be followed);
|
•
|
You may send a written notice that you are revoking your proxy to our Corporate Secretary, c/o Masimo Corporation, 52 Discovery, Irvine, California 92618, by the deadline; or
|
•
|
You may attend the Annual Meeting and vote in person. However, simply attending the Annual Meeting will not, by itself, revoke your proxy.
|
15. How are my shares voted if I give no specific instruction?
|
•
|
“For” the election of each of the Class I director nominees;
|
•
|
“For” the ratification of the selection of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending January 2, 2021; and
|
•
|
“For” the approval of our named executive officer compensation.
|
•
|
“For” the approval of an amendment to our 2017 Equity Incentive Plan.
|
•
|
“For” the approval of an amendment to our Executive Bonus Incentive Plan.
|
16. What is a broker non-vote?
|
18. What is the effect of abstentions and broker non-votes?
|
19. What happens if an incumbent director nominee does not receive a majority of the votes cast for his re-election?
|
20. What is the quorum requirement?
|
21. Who will count the votes?
|
22. Do Masimo’s officers and directors have an interest in any of the matters to be acted upon at the Annual Meeting?
|
23. Is Masimo Corporation’s Annual Report on Form 10-K part of the proxy materials?
|
24. How can I find out the results of the voting at the Annual Meeting?
|
25. When are stockholder proposals due for next year’s annual meeting of stockholders?
|
HOUSEHOLDING
|
ANNUAL REPORT ON FORM 10-K
|
OTHER MATTERS
|
|
By Order of the Board of Directors
|
|
|
|
Chairman & Chief Executive Officer
|
APPENDICES
|
APPENDIX A
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF GAAP PRODUCT REVENUE TO
CONSTANT CURRENCY PRODUCT REVENUE
|
||||||||||||||||
|
|
Fiscal 2019
|
|
Fiscal 2018
|
|
Fiscal 2017
|
||||||||||
(unaudited in thousands, except percentages)
|
|
$
|
|
$
|
|
$
|
||||||||||
GAAP product revenue
|
|
$
|
936,408
|
|
|
$
|
829,874
|
|
|
$
|
738,242
|
|
||||
Non-GAAP constant currency adjustments:
|
|
|
|
|
|
|
||||||||||
|
Constant currency F/X adjustments
|
|
6,702
|
|
|
—
|
|
|
—
|
|
||||||
|
|
Total non-GAAP product revenue adjustments
|
|
6,702
|
|
|
—
|
|
|
—
|
|
|||||
|
|
|
Constant currency product revenue
|
|
$
|
943,110
|
|
|
$
|
829,874
|
|
|
$
|
738,242
|
|
|
Product revenue growth %:
|
|
|
|
|
|
|
||||||||||
|
GAAP
|
|
12.8
|
%
|
|
|
|
|
||||||||
|
Constant currency
|
|
13.6
|
%
|
|
|
|
|
APPENDIX A
SUPPLEMENTAL FINANCIAL INFORMATION
RECONCILIATION OF GAAP OPERATING MARGIN TO
NON-GAAP OPERATING MARGIN(1)
|
||||||||||||||
|
|
|
|
Fiscal 2019
|
|
Fiscal 2018
|
|
Fiscal 2017
|
||||||
(unaudited in thousands, except percentages)
|
|
$
|
|
$
|
|
$
|
||||||||
GAAP operating margin
|
|
$
|
221,216
|
|
|
$
|
208,044
|
|
|
$
|
183,787
|
|
||
Non-GAAP adjustments:
|
|
|
|
|
|
|
||||||||
|
Royalty and other revenue, net of related costs
|
|
(1,262
|
)
|
|
(27,704
|
)
|
|
(48,384
|
)
|
||||
|
Acquisition/strategic investment related costs
|
|
4,729
|
|
|
1,442
|
|
|
1,597
|
|
||||
|
Litigation damages, awards and settlements
|
|
—
|
|
|
425
|
|
|
—
|
|
||||
|
|
Total non-GAAP adjustments for operating income/margin
|
|
3,467
|
|
|
(25,838
|
)
|
|
(46,787
|
)
|
|||
Non-GAAP operating income/margin
|
|
$
|
224,683
|
|
|
$
|
182,206
|
|
|
$
|
136,999
|
|
||
|
|
GAAP operating margin %
|
|
23.6
|
%
|
|
24.2
|
%
|
|
23.3
|
%
|
|||
|
|
Non-GAAP operating margin %
|
|
24.0
|
%
|
|
22.0
|
%
|
|
18.6
|
%
|
(1)
|
May not foot due to rounding.
|
(1)
|
May not foot due to rounding.
|
APPENDIX B
SUPPLEMENTAL FINANCIAL INFORMATION
FOR FISCAL 2019 EXECUTIVE BONUS INCENTIVE PLAN
RECONCILIATION OF GAAP PRODUCT REVENUE TO ADJUSTED PRODUCT REVENUE
(unaudited)
|
|||||
(in millions)
|
Fiscal 2019
|
||||
GAAP product revenues
|
|
$
|
936.4
|
|
|
Non-GAAP adjustments:
|
|
|
|||
|
F/X adjustments to plan rates
|
|
(0.3
|
)
|
|
|
Total Non-GAAP adjustments
|
|
(0.3
|
)
|
|
Adjusted product revenue for fiscal 2019 Executive Bonus Incentive Plan
|
|
$
|
936.1
|
|
APPENDIX B
SUPPLEMENTAL FINANCIAL INFORMATION
FOR FISCAL 2019 EXECUTIVE BONUS INCENTIVE PLAN
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP EARNINGS PER SHARE(EPS)(1)
(unaudited)
|
||||||
(in dollars)
|
|
Fiscal 2019
|
||||
GAAP EPS
|
|
$
|
3.44
|
|
||
Non-GAAP adjustments:
|
|
|
||||
|
Royalty and other revenue, net of related costs
|
|
(0.02
|
)
|
||
|
Acquisition/strategic investment related costs
|
|
0.08
|
|
||
|
Litigation damages, awards and settlements
|
|
—
|
|
||
|
Non-operating other (income) expense
|
|
0.01
|
|
||
|
Tax impact of pre-tax Non-GAAP adjustments above
|
|
(0.01
|
)
|
||
|
Excess tax benefits from stock-based compensation
|
|
(0.27
|
)
|
||
|
Tax impact of expiration of certain statutes of limitations related to unique and non-recurring tax positions
|
|
—
|
|
||
|
2017 U.S. Tax Reform
|
|
—
|
|
||
|
|
Total Non-GAAP adjustments
|
|
(0.22
|
)
|
|
Subtotal
|
|
3.22
|
|
|||
|
|
F/X adjustments to plan rates
|
|
(0.01
|
)
|
|
Adjusted Non-GAAP EPS for fiscal 2019 Executive Bonus Incentive Plan
|
|
$
|
3.21
|
|
(1)
|
May not foot due to rounding.
|
•
|
to attract and retain the best available personnel for positions of substantial responsibility;
|
•
|
to provide additional incentive to Employees, Directors and Consultants;
|
•
|
to promote the success of the Company’s business; and
|
•
|
to replace the Masimo Corporation 2007 Stock Incentive Plan (the “Existing Plan”).
|
1.1
|
Effective Date. The Plan will become effective upon approval by the Board or the
|
|
PROXY CARD AND DIRECTIONS
|
DIRECTIONS TO THE 2020 ANNUAL MEETING OF THE STOCKHOLDERS OF MASIMO CORPORATION
|
|
PROXY CARD AND DIRECTIONS
|
|
Vote by internet
• Go to www.envisionreports.com/MASI • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website |
Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas.
|
|
ý
|
|
|
PROXY CARD AND DIRECTIONS
|
|
|
Proposals
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
1.
|
To elect two Class I Directors as named in our Proxy Statement:
|
|
|
|
|
|
|
|
- Julie A. Shimer, Ph.D.
|
|
o
|
|
o
|
|
o
|
|
- H Michael Cohen
|
|
o
|
|
o
|
|
o
|
2.
|
To ratify the selection of Grant Thornton LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 2, 2021.
|
|
o
|
|
o
|
|
o
|
3.
|
To provide an advisory vote to approve the compensation of our named executive officers.
|
|
o
|
|
o
|
|
o
|
4.
|
Approval of an amendment to our 2017 Equity Incentive Plan.
|
|
o
|
|
o
|
|
o
|
5.
|
Approval of an amendment to our Executive Bonus Incentive Plan.
|
|
o
|
|
o
|
|
o
|
NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment of postponement thereof.
|
|
PROXY CARD AND DIRECTIONS
|
|
|
Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below
|
|
|
|
|
|
|
|
Date (mm/dd/yyyy) — Please print date below.
|
|
|
Signature 1 — Please keep signature within the box.
|
|
|
Signature 2 — Please keep signature within the box.
|
/ /
|
|
|
|
|
|
|
|
PROXY CARD AND DIRECTIONS
|
|
|
+
|
Proxy — MASIMO CORPORATION
|
|
|
|
|
Non-Voting Items
|
|
|
Change of Address — Please print new address below.
|
|
Comments — Please print your comments below.
|
||
|
|
|
|
IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A – C ON BOTH SIDES OF THIS CARD.
|
|
+
|
|
GUIDING PRINCIPLES
|
|
|
Ø
|
Remain faithful to your promises and responsibilities.
|
|||
|
Ø
|
Thrive on fascination and accomplishment and not on greed and power.
|
|||
|
Ø
|
Strive to make each year better than the year before both personally and for the team.
|
|||
|
Ø
|
Make each day as fun as possible.
|
|||
|
Ø
|
Do what is best for patient care.
|