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1.	To elect the following nominees as Class I directors to serve until our 2020 Annual Meeting of Stockholders: Dr. Steven J. Barker and Mr. Sanford Fitch;

2.	To ratify the selection of Grant Thornton LLP as our independent registered public accounting firm for our fiscal year ending December 30, 2017;

3.	To vote on an advisory resolution to approve named executive officer compensation;

4.	To vote on an advisory resolution on the frequency of future advisory resolutions to approve named executive officer compensation;

5.	To approve the Masimo Corporation 2017 Equity Incentive Plan;

6.	To approve the Masimo Corporation Executive Bonus Incentive Plan; and

7.	To conduct any other business properly brought before the Annual Meeting and any adjournment or postponement thereof.

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•	To elect the Class I nominees for director to serve until our 2020 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 our fiscal year ending December 30, 2017;

•	To vote on an advisory resolution to approve named executive officer compensation;

•	To vote on an advisory resolution on the frequency of future advisory resolutions to approve named executive officer compensation;

•	To approve our 2017 Equity Incentive Plan; and

•	To approve our Executive Bonus Incentive Plan.

•	“For” the nominees to the Board;

•	“For” the ratification of the selection of Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending December 30, 2017;

•	“For” the approval of our named executive officer compensation;

•	With respect to future advisory resolutions to approve named executive compensation “Every Year” (an annual vote);

•	“For” the approval of our 2017 Equity Incentive Plan; and

•	“For” the approval of our Executive Bonus Incentive Plan.

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•	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.

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•	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; or

•	You may attend the Annual Meeting and vote in person. However, simply attending the Annual Meeting will not, by itself, revoke your proxy.

•	“For” the election 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 December 30, 2017;

•	“For” the approval of our named executive officer compensation;

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•	With respect to future advisory resolutions to approve named executive compensation “Every Year” (an annual vote);

•	“For” the approval of our 2017 Equity Incentive Plan; and

•	“For” the approval of our Executive Bonus Incentive Plan.

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(1)	As of March 15, 2017.

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(1)	As of March 15, 2017.

(2)	Please see “Executive Officers” on page 15 of this Proxy Statement for Mr. Kiani’s biography.

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▪	except in unusual circumstances, the positions of the Chairman of our Board and our Chief Executive Officer be held by the same person;

▪	ordinarily, directors should not serve on more than four boards of publicly-traded companies, including our Board, and all our directors currently satisfy this requirement;

▪	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 29 of this Proxy Statement for additional information); and

▪

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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¬	Committee Chairperson.

(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.

(2)	Mr. Fitch served on the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee until October 27, 2016.

(3)	Mr. Harkin served on the Audit Committee until October 27, 2016.

(4)	Mr. Harkin was appointed as the Chairperson of the Nominating, Compliance and Corporate Governance Committee on February 11, 2016.

(5)	Mr. Lasersohn’s service on the Board and the committees thereof ended when his term expired at the 2016 Annual Meeting of Stockholders on April 20, 2016.

(6)	Mr. Lasersohn served on the Compensation Committee until February 26, 2016.

(7)	Mr. Mikkelson was appointed to our Board on October 27, 2016, at which time he was also appointed to the Audit Committee, the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee.

(8)	Mr. Reynolds served as the Chairperson of the Nominating, Compliance and Corporate Governance Committee until February 11, 2016.

▪	appointing, retaining and determining the compensation of our independent registered public accounting firm;

▪	overseeing and approving any proposed audit and permissible non-audit services provided by our independent registered public accounting firm;

▪	reviewing at least annually the qualifications, performance and independence of our independent registered public accounting firm;

▪	overseeing the relationship with our independent registered public accounting firm, including the rotation of the audit partners, as well as reviewing and resolving any disagreements between our management and ensuring discussions with our management and our independent registered public accounting firm relating to financial controls over financial reporting;

▪	discussing with our management and our independent registered public accounting firm the design, implementation and effectiveness of our internal controls;

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▪	reviewing and discussing with our management and our independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;

▪	reviewing the quarterly earnings announcement and any other public announcements regarding our results of operations with our management;

▪	reviewing and discussing reports from our independent registered public accounting firm relating to our critical accounting policies and practices;

▪	establishing and overseeing the processes and procedures for the receipt, retention and treatment of any complaints regarding accounting, internal controls or audit matters, as well as the confidential and anonymous submissions by employees concerning questionable accounting, auditing and internal control matters;

▪	investigating any matter brought to its attention, with full access to our books, records, facilities and employees, and with sole authority to select, retain and terminate any consultants, legal counsel or advisors to advise the Audit Committee; and

▪	reviewing and evaluating, at least annually, the performance of the Audit Committee and its members, including compliance of the Audit Committee with its charter.

▪	reviewing and approving our general compensation strategy;

▪	establishing annual and long-term performance goals for our executive officers;

▪	conducting and reviewing with the Board an annual evaluation of the performance of our executive officers;

▪	considering the competitiveness of the compensation of our executive officers;

▪	reviewing and approving all salaries, bonuses, equity awards, perquisites, post-service arrangements, and other compensation and benefit plans for our Chief Executive Officer and all other executive officers;

▪	reviewing and approving the terms of any offer letters, employment agreements, termination agreements or arrangements, change in control agreements and other material agreements between us, on the one hand, and any of our executive officers, on the other;

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▪	acting as the administering committee of our Board for our executive compensation and cash incentive plans and for any equity incentive plans, including establishing performance metrics, determining bonus payouts and granting equity awards to employees and executive officers;

▪	providing oversight for our overall compensation plans and benefit programs;

▪	reviewing and approving compensation programs as well as salaries, fees, bonuses and equity awards for the non-employee members of our Board;

▪	reviewing and discussing with management the annual Compensation Discussion and Analysis disclosure and the related tabular presentations regarding named executive officer compensation;

▪	overseeing risks and exposures associated with executive compensation programs and arrangements, including incentive plans; and

▪	reviewing and evaluating, at least annually, the performance of the Compensation Committee and its members, including compliance of the Compensation Committee with its charter.

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▪	evaluating the composition, size, organization and governance of our Board and its committees, making recommendations to our Board about the appointment of directors to committees of our Board and recommending the selection of chairs of these committees to the Board;

▪	reviewing and recommending to our Board director independence determinations made with respect to continuing and prospective directors;

▪	reviewing and recommending to our Board “Section 16 officer” determinations with respect to our executive officers;

▪	developing and recommending to our Board policies for considering director nominees for election to the Board;

▪	identifying, reviewing, considering and evaluating candidates for election to the Board and recommending to the Board candidates to be nominated for election or incumbent directors to be nominated for re-election at each annual meeting of our stockholders or to fill any vacancies on the Board or any newly-created directorships;

▪	overseeing our Board’s performance and annual self-evaluation process and evaluating the participation of members of the Board in continuing education activities in accordance with NASDAQ rules;

▪	overseeing corporate governance;

▪	overseeing our corporate compliance programs;

▪	developing, and updating as necessary, a legal compliance and ethics program designed to evaluate, maintain and correct, when appropriate, our overall compliance with all federal and state rules and regulations and all of the Company’s codes of ethics and conduct;

▪	in consultation with the Audit Committee, reviewing and, if appropriate, updating or recommending to our Board updates to our existing procedures for the receipt, retention and treatment of reports or evidence of violations of any federal or state rules or regulations or of our codes of ethics and conduct; and

▪	reviewing and evaluating, at least annually, the performance of the Nominating, Compliance and Corporate Governance Committee and its members, including compliance of the Nominating, Compliance and Corporate Governance Committee with its charter.

▪	the highest ethical standards and integrity and a strong personal reputation;

▪	a background that provides experience and achievement in business, finance, biotechnology or other activities relevant to our business and activities;

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▪	a willingness to act on and be accountable for Board and, as applicable, committee decisions;

▪	an ability to provide reasoned, informed and thoughtful counsel to management on a range of issues affecting us and our stockholders;

▪	an ability to work effectively and collegially with other individuals;

▪	loyalty and commitment to driving our success and increasing long-term value for our stockholders;

▪	sufficient time to devote to Board and, as applicable, committee membership and matters; and

▪	the independence requirements imposed by the SEC and NASDAQ.

▪	the name and address of the stockholder of record and any beneficial owner on whose behalf the nomination is being made;

▪	the class, series and number of shares of Masimo, and any convertible securities of Masimo, that are beneficially owned by the stockholder of record and any beneficial owner on whose behalf the nomination is being made;

▪	any proxy, contract, arrangement, understanding or relationship pursuant to which the stockholder of record and any beneficial owner on whose behalf the nomination is being made has the right to vote any of Masimo’s voting securities;

▪	any “short” interest in Masimo’s securities held by the stockholder of record and any beneficial owner on whose behalf the nomination is being made;

▪	the proposed director candidate’s full legal name, age, business address and residential address;

▪	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;

▪	a description of the proposed candidate’s qualifications as a director;

▪	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

▪	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 Exchange Act.

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▪	the name and address of the Masimo security holder(s) on whose behalf the communication is sent; and

▪	the number of Masimo shares that are owned beneficially by the security holder(s) as of the date of the communication.

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(1)	Joe Kiani, our Chairman and Chief Executive Officer and a named executive officer, is not included in this table as he is an employee of ours and therefore receives no compensation for his service as a director. Mr. Kiani’s compensation is included in the “Summary Compensation Table” on page 61 of this Proxy Statement.

(2)	As of December 31, 2016, Dr. Steven Barker and Sanford Fitch each held 3,249 RSUs, and none of our other non-employee directors held any RSUs.

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(3)

These amounts generally represent the aggregate grant date fair value of equity awards for grants of options and RSU awards to each listed director in fiscal 2016, computed in accordance with authoritative accounting guidance. These amounts do not represent the actual amounts paid to or realized by the directors during fiscal 2016. The value as of the grant date for stock options is recognized over the number of days of service required for the stock option to vest in full. The value as of the grant date for the RSUs is calculated based on the number of restricted share units at the grant date market price and is recognized once the requisite service period for the restricted share unit is satisfied.

(4)	As of December 31, 2016, each of our non-employee directors held the following number of options: Steven J. Barker, Ph.D., M.D.—140,000; Sanford Fitch—100,000; Thomas Harkin—0; Adam Mikkelson—0 and Craig Reynolds—100,000.

(5)	Consists of fees earned by Dr. Barker for non-employee consulting services provided to the Company.

(6)	Mr. Lasersohn’s service on the Board and the committees thereof ended when his term expired at our 2016 Annual Meeting of Stockholders held on April 20, 2016.

(7)	Mr. Mikkelson was appointed to our Board effective October 27, 2016.

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▪	Adopted a 2017 Equity Incentive Plan (the “2017 Equity Plan”) to replace our 2007 Stock Incentive Plan. The 2017 Equity Plan, which is subject to stockholder approval at the Annual Meeting of Stockholders on June 1, 2017, provides for the following, among other provisions:

•	The annual “evergreen” provision contained in the 2007 Stock Incentive Plan was eliminated.

•	The initial number of shares to be reserved under the 2017 Equity Plan will be no greater than the total number of shares already reserved under the 2007 Stock Incentive Plan as of the time the 2017 Equity Plan becomes effective.

•	Stock options and stock appreciation rights granted under the 2017 Equity Plan may not be repriced without stockholder approval of an “Exchange Program” (as defined in the 2017 Equity Plan).

•	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.

•	Permits the Board or Compensation Committee 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 Board’s or Compensation Committee’s sole discretion, such reduction or elimination is appropriate.

•	The principal terms of the PSU awards to be granted in fiscal 2017 under the 2017 Equity Plan would be as follows:

–

The shares of our common stock subject to the PSU awards will be earned based on our actual achievement of pre-established Adjusted Operating Income levels over a one-year performance period. These levels include a “threshold” performance level (below which no shares will be earned), a “target” performance level, and a “maximum” performance level (capped at 150% of the target performance level). For purposes of these PSU awards, “Adjusted Operating Income” will be defined as GAAP operating income, as adjusted for certain non-recurring items in accordance with the 2017 Equity Plan.

–	The shares of our common stock (if any) earned pursuant to these PSU awards will be subject to vesting over a five-year period at a rate of 20% of the earned shares each year, including 20% credit for the fiscal 2017 performance period.

•	The time-based stock options, with an exercise price equal to the fair market value of the covered shares on the date of grant, would also be subject to vesting over a five-year period at the rate of 20% per year.

▪	Executive Bonus Incentive Plan - Adopted a new cash bonus plan for our executive officers (the “Executive Bonus Incentive Plan”) to replace our previous annual cash bonus plans for our executive officers. The new cash bonus plan is subject to stockholder approval at the Annual Meeting of Stockholders on June 1, 2017.

•	Pursuant to the Executive Bonus Incentive Plan, the Compensation Committee will not have discretion to increase the bonus payments for the executive officers above the amount determined pursuant to the bonus payment formula.

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Fiscal 2017 annual cash bonus opportunities for our executive officers, including the NEOs, will be based on our actual achievement of pre-established performance levels for revenues and net income per diluted share, as adjusted for certain non-recurring items in accordance with the Executive Bonus Incentive Plan. These levels include a “threshold” performance level (below which no bonus payments will be made), a “target” performance level, and a “maximum” performance level (capped at 200% of the target annual cash bonus incentive opportunity).

•	The Compensation Committee did not adopt a multi-year bonus plan for fiscal 2017.

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▪	Eliminated “single trigger” payments upon a change in control of the Company;

▪	Eliminated his receipt of full value shares in lieu of stock options upon a Qualifying Termination, as defined in the 2015 CEO Agreement;

▪	Eliminated our obligation to pay the federal and state withholding taxes due upon the receipt of such full value shares;

▪	Eliminated tax “gross-up” or similar payments in the event that the excise taxes imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), were triggered upon a change in control of the Company;

▪	Eliminated the provisions in the previous employment agreement providing for survival of the foregoing protections following the expiration of such agreement; and

▪	Terminated his right to receive an annual option to purchase 300,000 shares of our common stock after fiscal 2017.

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▪	Our closing stock price of $67.40 per share on the last trading day of fiscal 2016 represented a 62.4% increase from the closing stock price of $41.51 per share on the last trading day of fiscal 2015.

▪	Product revenues significantly exceeded the guidance we issued at the beginning of the year and increased by 10.8% to $663.8 million, as compared to product revenues of $599.3 million in fiscal 2015.

▪	Total revenues, including royalties, increased to $694.6 million, up 10.2% from $630.1 million in fiscal 2015.

▪	Masimo rainbow® product revenues increased to $66.7 million, up 7.8% from $61.8 million in fiscal 2015.

▪	Masimo SET® and rainbow SET™ shipments totaled 186,000 units, up from 182,600 in the prior year, setting a new Masimo record and resulting in an estimated installed base of more than 1,504,000 circuit boards and pulse oximeters as of December 31, 2016.

▪	Product gross profit margins increased from 63.3% to 65.2% due primarily to a combination of favorable product mix, the benefits of the Company’s value engineering activities and other cost reduction programs.

▪	Net income per diluted share was $5.65, up 264.5% from $1.55 in 2015. Included in our net income per diluted share was $3.49 per diluted share related to the Litigation Settlement (as defined below), which was offset by $0.06 per diluted share for a charitable donation made from the settlement proceeds.

▪	Financial performance metrics included return on assets of 37%, return on capital of 54% and return on equity of 54%.

▪	Completion of share repurchases approximating 1,496,000 shares at an average cost of $42.39 per share.

▪

Finalization of a multi-year business partnership arrangement for patient monitoring and select therapy solutions with Koninklijke Philips N.V., including a Settlement Agreement and Release of Claims (the “Litigation Settlement”) that resulted in a $300 million payment to the Company and the dismissal, with prejudice, of all pending legal disputes between the companies, including the patent infringement and antitrust lawsuits.

▪	Base Salaries - Increased the annual base salaries of our NEOs, including our CEO, by 3%, which was consistent with increases provided to other employees in the Company as a whole.

▪	Annual Cash Bonuses - Based on our strong financial performance in fiscal 2016, under our Fiscal 2016 Executive Bonus Plan, annual cash bonuses paid to our NEOs other than our CEO ranged from $179,887 to $216,300, and an annual cash bonus in the amount of $1,030,000 was paid to our CEO.

▪	Multi-Year Cash Bonuses - Based on our financial performance for the three-year performance period from fiscal 2014 through fiscal 2016, under our Multi-Year Executive Bonus Plan, cash bonuses paid to NEOs other than our CEO ranged from $502,394 to $545,455, and a cash bonus in the amount of $2,624,079 was paid to our CEO.

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Long-Term Incentive Compensation - 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 $393,030 and an option to purchase shares of our common stock to our CEO with a grant date fair value in the amount of $3,930,900, in all cases with an exercise price equal to the fair market value of the covered shares on the date of grant.

(1)	The Multi-Year Executive Cash Bonus percentage for each NEO was based on 1/3 of the target grant date value for the three-year performance period that commenced on December 29, 2013 and ended on December 31, 2016.

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+	Maintain an Independent Compensation Committee. The Compensation Committee consists solely of independent directors who establish our compensation practices.

+	Retain 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.

+	Annual Executive Compensation Review. At least once a year, the Compensation Committee conducts a review of our compensation strategy.

+	Compensation At-Risk. 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.

+

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.

+

Multi-Year Vesting Requirements. To align the interests of our executive officers and stockholders, the time-based equity awards granted to our executive officers vest over a five-year period. Beginning in 2017, executive officer PSU awards will be earned based on a one-year performance period upon the Compensation Committee’s assessment of the associated performance level achievement, but continue to vest over a five-year period.

+

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.

+	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 the guidelines, shares of our common stock.

+	Conduct an Annual Stockholder Advisory Vote on Named Executive Officer Compensation. We conduct an annual stockholder advisory vote on the compensation of the NEOs. The Compensation Committee considers the results of this advisory vote during the course of its deliberations.

+	Regular Stockholder Engagement that Includes our Compensation Committee Chair. We engage on executive compensation matters with our stockholders and include our Compensation Committee chairman in these engagement activities.

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-	No Guaranteed Bonuses. We do not provide guaranteed bonuses to our executive officers.

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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 Code Section 401(k) defined contribution plan on the same basis as our other employees.

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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.

-	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.

-	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.

-	No Special Welfare or Health Benefits. We do not provide our executive officers with any welfare or health benefit programs, other than participation in our broad-based employee programs.

-	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.

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▪	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.

▪	attracts and retains talent

▪	motivates strong business performance without encouraging excessive risk taking

▪	attracts and retains talent

▪	drives the achievement of key business results on an annual or multi-year basis

▪	recognizes individuals based on their contributions

▪	performance-based and not guaranteed

▪	attracts and retains talent

▪	drives the achievement of long-term key business results

▪	directly ties the interests of executives to the interests of our stockholders

▪	recognizes individuals based on their continued contributions

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▪	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 companies in our compensation peer group;

▪	the scope of each executive officer’s role compared to other similarly-situated executives at 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; and

▪	with respect to his direct reports, the recommendations of our CEO.

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▪	consulting with the Compensation Committee chair 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 long-term incentive 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; and

▪	assessing compensation risk to determine whether the Company’s compensation policies and practices are reasonably likely to have a material adverse impact on the Company.

▪	Revenue - ~0.4 times to ~2.5 times our last four fiscal quarter revenue of approximately $618 million (~$154 million to $1.5 billion);

▪	Market Capitalization - ~0.33 times to ~3.0 times our then market capitalization of $2.1 billion (~$700 million to $6.3 billion); and

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▪	Industry - health care equipment and supplies (based on our Global Industry Classification Standard code 351010).

(1)	Cyberonics Corporation merged with Sorin S.p.A. effective October 15, 2015 creating a new company, LivaNova PLC.

(2)	Greatbatch, Inc. changed its name to Integer Holdings Corporation effective June 30, 2016.

(3)	Sirona Dental Systems, Inc. was acquired by DENTSPLY International Inc. on February 29, 2016.

(4)	Thoratec Corporation was acquired by St. Jude Medical, Inc. on October 8, 2015.

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▪	we did not fully achieve the pre-established target levels for the two financial measures and, with respect to our executive officers other than our CEO, the operational performance objectives, it could set the applicable Company Performance Factor at any level it determines to be appropriate, including zero;

▪	we fully achieved the pre-established target levels for the two financial measures and, with respect to our executive officers other than our CEO, the operational performance objectives, the applicable Company Performance Factor would be 100%; and

▪	we exceeded 100% achievement of the pre-established target levels for the two financial measures and, with respect to our executive officers other than our CEO, the operational performance objectives, it could set the applicable Company Performance Factor at or above 100%.

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(i)	achieve a specified level of OEM board and Masimo monitor shipments;

(ii)	achieve a specified level of single patient adhesive and disposable sensor shipments;

(iii)	achieve a specified level of rainbow® product revenues;

(iv)	make our customers 100% successful and 100% advocates of us and our technologies; and

(v)	measure and improve our quality compared to our competitors.

▪	Our closing stock price of $67.40 per share on the last trading day of fiscal 2016 represented a 62.4% increase from the closing stock price of $41.51 per share on the last trading day of fiscal 2015.

▪	Product revenues of $663.8 million significantly exceeded our original $640.0 million guidance and were up 10.8% over our product revenues of $599.3 million in fiscal 2015.

▪	Total revenues, including royalties, increased to $694.6 million, up 10.2% from $630.1 million in fiscal 2015.

▪	Masimo rainbow® product revenues increased to $66.7 million, up 7.8% from $61.8 million in fiscal 2015.

▪	Masimo SET® and rainbow SET™ shipments totaled 186,000 units, up from 182,600 in the prior year, setting a new Masimo record and resulting in an estimated installed base of more than 1,504,000 circuit boards and pulse oximeters as of December 31, 2016.

▪	Product gross profit margins increased from 63.3% to 65.2% due primarily to a combination of favorable product mix, the benefits of the Company’s value engineering activities and other cost reduction programs.

▪	Net income per diluted share was $5.65, up 264.5% from $1.55 in 2015 and represented 334% of the original fiscal 2016 financial guidance of $1.69. Included in our net income per diluted share was $3.49 per diluted share related to the Litigation Settlement, which was offset by $0.06 per diluted share for a charitable donation made from the settlement proceeds.

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▪	Financial performance metrics included return on assets of 37%, return on capital of 54% and return on equity of 54%.

▪	Completed share repurchases approximating 1,496,000 shares at an average cost of $42.39 per share.

▪	Finalized a multi-year business partnership arrangement for patient monitoring and select therapy solutions with Koninklijke Philips N.V., including the Litigation Settlement that resulted in a $300 million payment to the Company and the dismissal, with prejudice, of all pending legal disputes between the companies, including the patent infringement and antitrust lawsuits.

▪	105% achievement of our single patient adhesive and disposable sensor goals;

▪	101% achievement of our OEM board and monitor shipment goal of 185,000 units; and

▪	98% achievement of our rainbow® product revenues goal of $68.0 million.

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▪

Mr. de Raad - During fiscal 2016, one of Mr. de Raad’s primary areas of focus was to lead the effort of generating a management plan that would allow the Company to continue to deliver on its goal of increased financial leverage. Throughout the year, Mr. de Raad worked cross functionally with our manufacturing, operations, engineering, sales, marketing and general and administrative functions to insure adherence to the Company’s annual management plan as well as work to identify opportunities to both improve efficiencies and lower costs. Within Mr. de Raad’s functional responsibilities, he delivered on all the Company’s internal and external reporting obligations and, at the same time, developed additional management reporting tools which have allowed the Company to more effectively analyze operating performance within a number of areas of the business. Mr. de Raad also supported a number of new corporate initiatives designed to expand the Company’s presence throughout the world, implemented a new treasury management system and addressed a variety of technical accounting and reporting related topics. Within Mr. de Raad’s investor relations responsibilities, he attended numerous investor conferences and analyst events throughout the year allowing the investment community to better understand the Company’s financial plans, including its focus on financial leverage. Based on Mr. de Raad’s 2016 achievements, our CEO recommended, and the Compensation Committee approved, a 100% Individual Performance Factor for Mr. de Raad.

▪

Mr. Lee - During fiscal 2016, Mr. Lee managed a significant number of key initiatives in Information Technology, Information Systems and Facilities. Mr. Lee directed the effort to improve performance of the Company’s worldwide computer network services by implementing new core network switches with active redundancies in all of its major offices. This work resulted in increased reliability of the computing environment for the Company. Under the leadership of Mr. Lee, the information technology team has also taken several major steps to significantly improve the security and safety of the computer network. The information systems team has launched a number of systems to enhance efficiencies for employees to be more productive.  These improvements allow employees to seamlessly collect customer feedback and process it through the organization to help improve product quality and to satisfy reporting requirements. Furthermore, the improvements help the Company remain compliant with regulatory requirements of various agencies worldwide, while also automating the creation and distribution of the Company’s strategic sales reports. In addition, Mr. Lee negotiated real property leases in Irvine, California and Tokyo, Japan to accommodate for the Company’s growth and played a major role in launching Masimo Korea. Based on Mr. Lee’s 2016 achievements, our CEO recommended, and the Compensation Committee approved, a 100% Individual Performance Factor for Mr. Lee.

▪

Mr. McClenahan - Mr. McClenahan’s achievements in 2016 included the successful conclusion of several important litigation matters and disputes, including the settlement of the Company’s patent and antitrust litigation with Philips, the amendment of the Company’s royalty agreement with Medtronic, and the settlement of a dispute with the Company’s insurance carriers.  Mr. McClenahan provided key legal guidance and support throughout the year for the Company’s sales, marketing, regulatory and human resources functions.  He also led the Company’s compliance function, including several important training, audit, and monitoring initiatives.  Based on Mr. McClenahan’s 2016 achievements, our CEO recommended, and the Compensation Committee approved, a 105.1% Individual Performance Factor for Mr. McClenahan.

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▪

Mr. Sampath - During fiscal 2016, Mr. Sampath led a significant number of key initiatives, including the launch and receipt of FDA clearance of several important products, including: Root Vital Signs with Blood Pressure and Temperature, Radius-7® Wearable Pulse Co-Oximeter with SpHb® and the TFA-1™ single patient use forehead sensor. Launch and readiness for products with a CE Mark included the O3 Regional Oximetry for Pediatrics and the Rad-97™ compact Pulse Co-Oximeter family. Additionally, Oxygen Reserve Index (ORi™) was cleared for sale in Japan. The first Masimo product to provide data connectivity to medical devices under the Iris product family was developed and launched in 2016, extending Masimo’s footprint in hospitals and other medical facilities. In Mr. Sampath’s manufacturing role, the Company was able to build and ship a new record number of SpO2 sensors while expanding the Company’s manufacturing footprint in a new manufacturing facility in San Luis Rio Colorado, Mexico. Mr. Sampath also led the Company’s on-going value engineering efforts, which in fiscal 2016, exceeded the targeted goals. In addition, Mr. Sampath worked extensively to improve the Company’s regulatory processes, requiring collaborative and cross-functional process improvements within the marketing, clinical research, regulatory and research and development organizations. Based on Mr. Sampath’s 2016 achievements, our CEO recommended, and the Compensation Committee approved, a 100% Individual Performance Factor for Mr. Sampath.

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•	Adjusted product revenues1 were $1,863.2 million, which were slightly lower than the target level of $1,898.5 million, yielding a 98.1% achievement; and

•	Adjusted net income per diluted share2 was $8.683, which was significantly above the target level of $5.01, yielding a 173.3% achievement.

1	Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the unique adjustments and reconciliation to our Plan Period GAAP product revenues.

2	Non-GAAP financial measure - please see Appendix A to this Proxy Statement for a description of the unique adjustments and reconciliation to our Plan Period GAAP net income per diluted share.

3	Includes $3.49 per diluted share related to the Litigation Settlement during fiscal 2016, which was offset by $0.06 per diluted share for a fiscal 2016 charitable donation made from the settlement proceeds.

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▪	our CEO is required to own that number of shares of our common stock with a market value equal to at least six times his annual base salary; and

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▪	our other executive officers are required to own that number of shares of our common stock with a market value equal to at least their annual base salary. For purposes of our policy, an executive officer’s base salary during any calendar year is deemed to be his or her base salary as of the close of business on December 31st of the immediately preceding year.

▪	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.

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(1)

Amounts set forth in the “Stock Awards” and “Option Awards” columns for 2014, 2015 and 2016 reflect the grant date fair value of stock and option awards granted in the year indicated, computed in accordance with authoritative accounting guidance. 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 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 14 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 filed with the SEC on February 15, 2017, 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 RSUs and stock options granted in our fiscal years 2014, 2015 and 2016.

(2)	All amounts were paid pursuant to the Fiscal 2016 Executive Bonus Plan or the Multi-Year Executive Bonus Plan.

(3)

This column excludes amounts included in the “Stock Awards” column of $111,915,000 for Mr. Kiani, which represents the grant date fair value of an award of 2.7 million restricted share units (“RSUs”) with contingent vesting granted to Mr. Kiani in November 2015 in connection with the amendment and restatement of his employment agreement. These RSUs will only vest in connection with a termination of Mr. Kiani’s employment with us other than for death, disability or cause, or Mr. Kiani’s termination of his employment with us for Good Reason. These RSUs will not vest if Mr. Kiani voluntarily terminates his employment with us other than for Good Reason. The 2015 CEO Agreement provides that on January 1 of each year, beginning on January 1, 2018, 270,000 shares subject to the RSUs will terminate without the payment of any consideration to Mr. Kiani, to the extent then unvested. See “—Employment Arrangements with Named Executive Officers—Employment Agreement with Joe Kiani” on page 66 of this Proxy Statement for additional information regarding the restricted share unit award.

(4)	Consists of $1,030,000 paid pursuant to the Fiscal 2016 Executive Bonus Plan and $2,624,079 paid pursuant to the Multi-Year Executive Bonus Plan.

(5)

Consists of $6,461 in retirement savings plan matching contributions, $367,967 for the for the net incremental costs of certain lodging, meals and other travel-related expenses incurred by Mr. Kiani’s 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 Joe Kiani” on page 66 of this Proxy Statement) and $23,363 for the net incremental costs of security personnel and security services provided to Mr. Kiani during certain personal, non-business-related occasions, which represents the actual amounts paid by the Company for such security arrangements for Mr. Kiani that were not security arrangements provided at the Company’s business facilities, and for business travel. 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.

(6)

Represents the grant date fair value of 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. These RSUs will only vest in connection with a termination of Mr. Kiani’s employment with us other than for death, disability or cause, or Mr. Kiani’s termination of his employment with us for Good Reason. These RSUs will not vest if Mr. Kiani voluntarily terminates his employment with us other than for Good Reason. The 2015 CEO Agreement provides that on January 1 of each year, beginning on January 1, 2018, 270,000 shares subject to the RSUs will terminate without the payment of any consideration to Mr. Kiani, to the extent then unvested. See “—Employment Arrangements with Named Executive Officers—Employment Agreement with Joe Kiani” on page 66 of this Proxy Statement for additional information regarding the restricted share unit award.

(7)	Consists of $200,850 paid pursuant to the Fiscal 2016 Executive Bonus Plan and $545,455 paid pursuant to the Multi-Year Executive Bonus Plan.

(8)	Consists of $7,950 in retirement savings plan matching contributions.

(9)	Consists of $179,887 paid pursuant to the Fiscal 2016 Executive Bonus Plan and $516,509 paid pursuant to the Multi-Year Executive Bonus Plan.

(10)	Consists of $7,950 in retirement savings plan matching contributions and $36,460 of net incremental personal and family travel expenses, which represents the actual costs incurred by the Company for such travel.

(11)	Consists of $205,700 paid pursuant to the Fiscal 2016 Executive Bonus Plan and $502,394 paid pursuant to the Multi-Year Executive Bonus Plan.

(12)	Consists of $7,950 retirement savings plan matching contributions and $65,116 of net incremental personal and family travel expenses, which represents the actual costs incurred by the Company for such travel.

(13)	Consists of $216,300 paid pursuant to the Fiscal 2016 Executive Bonus Plan and $544,647 paid pursuant to the Multi-Year Executive Bonus Plan.

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(1)	Excludes potential payments under the Multi-Year Executive Bonus Plan for the three-year period from December 29, 2013 to December 31, 2016. See “— Multi-Year Executive Cash Bonus” on page 53 of this Proxy Statement for additional details.

(2)

Represents potential payments under the Fiscal 2016 Executive Bonus Plan. The amounts shown as target represent the potential target payments assuming 100% achievement of the Company Factors (determined based on our performance against financial targets for our CEO and against financial targets and operational objectives for our other NEOs), and 100% achievement of the Individual Factors, as determined by our Board and Compensation Committee. There are no threshold or maximum amounts payable under the Fiscal 2016 Executive Bonus Plan. If the Compensation Committee determines that (i) we did not achieve 100% of the financial targets and, with respect to the NEOs other than the CEO, the operational objectives, the Compensation Committee can set the Company Factor at any factor it deems appropriate, including 0%; (ii) we achieved 100% of the financial targets and, with respect to the NEOs other than the CEO, the operational objectives, the Company Factor is 100%; and (iii) we achieved more than 100% of the financial targets and, with respect to the NEOs other than the CEO, the operational objectives, the Compensation Committee can set the Company Factor at or above 100%.

(3)	Amounts reflect the fair value per share as of the grant date of the award multiplied by the number of shares. 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.

(4)	This option vests over a five-year period, with 20% of the shares subject to the option vesting on each anniversary.

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(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 plan 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 a restricted share unit award with respect to 2.7 million shares of common stock granted to Mr. Kiani in November 2015 in connection with the amendment and restatement of his employment agreement. The RSUs will only vest in the event of a termination of Mr. Kiani’s employment with us other than for death, disability or cause, or Mr. Kiani’s termination of his employment with us for Good Reason. These RSUs will not vest if Mr. Kiani voluntarily terminates his employment with us other than for Good Reason. The 2015 CEO Agreement provides that on January 1 of each year, beginning on January 1, 2018, 270,000 shares subject to the RSUs will terminate without the payment of any consideration to Mr. Kiani, to the extent then unvested. See “—Employment Arrangements with Named Executive Officers—Employment Agreement with Joe Kiani” on page 66 of this Proxy Statement for additional information regarding the restricted share unit award.

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(1)	The value realized equals the excess of the fair market value of our common stock at exercise over the option exercise price, multiplied by the number of shares for which the option was exercised.

•	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 $1,030,000 per year in July 2016.

•

Eligibility to receive an annual bonus in accordance with the Fiscal 2016 Executive Bonus Plan, equal to 100% of his base salary in the event we attain certain financial goals set by our Board or the Compensation Committee; provided that, in the event our Board or Compensation Committee determines that we achieved each of the financial measures included in the criteria for the Company Factor for a plan year under our Fiscal 2016 Executive Bonus Plan, Mr. Kiani shall automatically be entitled to receive a bonus equal to 100% of his base salary (or such higher percentage approved by our Board or Compensation Committee for such year). In addition, Mr. Kiani may be entitled to receive such additional bonus amounts as the Board or the Compensation Committee shall determine in its discretion.

•

As guaranteed under the prior employment agreement, during each of fiscal years 2016 and 2017, an annual grant of a non-qualified stock option to purchase an aggregate of at least 300,000 shares of common stock that vests at a rate of 20% per year, with an exercise price per share equal to 100% of the fair market value of one share of common stock on the date of grant. After fiscal year 2017, there are no guaranteed or minimum grants of stock options or any other type of equity required under the 2015 CEO Agreement, but Mr. Kiani will be entitled to receive equity grants with a value at least consistent with equity grants made to comparable chief executive officers of comparable companies (taking into account revenues, market capitalization and industry). In the event our 2017 Equity Plan is approved by our stockholders at the Annual Meeting, Mr. Kiani has agreed to waive his contractual

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•	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 2015 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 2015 CEO Agreement, Mr. Kiani is exempt from our travel and expense policy and our expense reimbursement policy.

•	payment of an amount equal to his full base salary through the date of termination, if applicable, and an additional amount equal to two times the sum of his base salary then in effect and the average annual bonus paid to Mr. Kiani over the prior three years, which shall be paid in installments over two years pursuant to our normal payroll practices; and

•	all of Mr. Kiani’s outstanding options and other equity awards will immediately vest.

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•	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.

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•

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

•	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 chief executive officer; 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.

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(1)	Consists of the value of in-the-money stock options held by Mr. Kiani as of December 31, 2016, the vesting of which would be accelerated.

(2)	Upon the qualifying event, all of the 2.7 million shares of common stock subject to the restricted share unit award granted to Mr. Kiani under the 2015 CEO Agreement will become vested. Represents the value of the shares of common stock subject to the restricted share unit award based on the closing stock price of $67.40 per share.

(3)	Upon the qualifying event, the Company shall pay to Mr. Kiani a single lump payment of $35.0 million 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.

(4)	Presumes a remaining term of the 2015 CEO Agreement of one year. Comprised of the cash equivalent of the Company’s 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.

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(1)	Consists of the value of 100% of the in-the-money stock options held by Mr. de Raad as of December 31, 2016, the vesting of which would be accelerated.

(2)	Consists of the value of 50% of the in-the-money stock options held by Mr. de Raad as of December 31, 2016, the vesting of which would be accelerated.

(3)	Assumes that Mr. de Raad does not commence employment with another employer during the period from January 1, 2017 through December 31, 2017.

(4)	Comprised of health, dental and vision insurance benefits for Mr. de Raad and his eligible dependents for 12 months.

(5)	Comprised of health, dental and vision insurance benefits for Mr. de Raad and his eligible dependents for 12 months and life insurance for Mr. de Raad for 12 months.

(1)	Consists of the value of 100% of the in-the-money stock options held by Mr. Lee as of December 31, 2016, the vesting of which would be accelerated.

(2)	Consists of the value of 50% of the in-the-money stock options held by Mr. Lee as of December 31, 2016, the vesting of which would be accelerated.

(3)	Assumes that Mr. Lee does not commence employment with another employer during the period from January 1, 2017 through December 31, 2017.

(4)	Comprised of health, dental and vision insurance benefits for Mr. Lee and his eligible dependents for 12 months.

(5)	Comprised of health, dental and vision insurance benefits for Mr. Lee and his eligible dependents for 12 months and life insurance for Mr. Lee for 12 months.

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(1)	Consists of the value of 100% of the in-the-money stock options held by Mr. McClenahan as of December 31, 2016, the vesting of which would be accelerated.

(2)	Consists of the value of 50% of the in-the-money stock options held by Mr. McClenahan as of December 31, 2016, the vesting of which would be accelerated.

(3)	Assumes that Mr. McClenahan does not commence employment with another employer during the period from January 1, 2017 through December 31, 2017.

(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.

(1)	Consists of the value of 100% of the in-the-money stock options held by Mr. Sampath as of December 31, 2016, the vesting of which would be accelerated.

(2)	Consists of the value of 50% of the in-the-money stock options held by Mr. Sampath as of December 31, 2016, the vesting of which would be accelerated.

(3)	Assumes that Mr. Sampath does not commence employment with another employer during the period from January 1, 2017 through December 31, 2017.

(4)	Comprised of health, dental and vision insurance benefits for Mr. Sampath and his dependents for 12 months.

(5)	Comprised of health, dental and vision insurance benefits for Mr. Sampath and his dependents for 12 months and life insurance for Mr. Sampath for 12 months.

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•	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 Auditing Standard No. 16 Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board; 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 Public Company Accounting Oversight Board and discussed the auditors’ independence with them.

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(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 that are traditionally performed by our independent registered public accounting firm and include fees reasonably related to the performance of the audit or review of our interim consolidated financial statements and not reported under the caption “Audit Fees”. For the fiscal year ended December 31, 2016, these services included fees primarily for the audit of our retirement savings plan. For the fiscal year ended January 2, 2016, these services included fees primarily for the audit of our retirement savings plan.

(3)	Tax fees consist of fees for preparation of our federal and state income tax returns, general consultation and international tax research.

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▪	Our closing stock price of $67.40 per share on the last trading day of fiscal 2016 represented a 62.4% increase from the closing stock price of $41.51 per share on the last trading day of fiscal 2015.

▪	Product revenues significantly exceeded the guidance we issued at the beginning of the year and increased by 10.8% to $663.8 million, as compared to product revenues of $599.3 million in fiscal 2015.

▪	Total revenues, including royalties, increased to $694.6 million, up 10.2% from $630.1 million in fiscal 2015.

▪	Masimo rainbow® product revenues increased to $66.7 million, up 7.8% from $61.8 million in fiscal 2015.

▪	Masimo SET® and rainbow SET™ shipments totaled 186,000 units, up from 182,600 in the prior year, setting a new Masimo record and resulting in an estimated installed base of more than 1,504,000 circuit boards and pulse oximeters as of December 31, 2016.

▪	Product gross profit margins increased from 63.3% to 65.2% due primarily to a combination of favorable product mix, the benefits of the Company’s value engineering activities and other cost reduction programs.

▪	Net income per diluted share was $5.65, up 264.5% from $1.55 in 2015. Included in our fiscal 2016 net income per diluted share was $3.49 per diluted share related to the Litigation Settlement, which was offset by $0.06 per diluted share for a charitable donation made from the settlement proceeds.

▪	Financial performance metrics included return on assets of 37%, return on capital of 54% and return on equity of 54%.

▪	Completed share repurchases approximating 1,496,000 shares at an average cost of $42.39 per share.

▪

In November 2016, we realized an important achievement by finalizing a multi-year business partnership arrangement for patient monitoring and select therapy solutions with Koninklijke Philips N.V., including the Litigation Settlement, that resulted in a $300 million payment to the Company and the dismissal, with prejudice, of all pending legal disputes between the companies, including the patent infringement and antitrust lawsuits. We believe that this partnership arrangement will increase the adoption rate of our innovative technologies, including rainbow® technology, and result in improved outcomes for patients and reduced cost of care for hospitals.

▪	Throughout fiscal 2016, we continued to deliver exciting new technologies and products into the market including MightySat™ with RRp™, next generation SedLine®, Radius-7™ with rainbow® and Rad-97™.

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▪	Adoption of the 2017 Equity Plan, subject to stockholder approval, to replace our 2007 Stock Incentive Plan. The 2017 Equity Plan, among other things, eliminates the annual “evergreen” provision contained in the 2007 Stock Incentive Plan; and

▪	Adoption of the Executive Bonus Incentive Plan, subject to stockholder approval, which provides for performance-based bonus awards for our executive officers.

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•	Remain Competitive by Attracting and Retaining Talent. The Board and the Compensation Committee considered the importance of maintaining an ongoing equity incentive program to attract, retain and reward our employees, directors and other service providers.

•

Past Number of Shares Granted Under the Existing Plan. Over the last three fiscal years, we granted equity awards representing a total of 6.8 million shares. This level of share usage would deplete the proposed shares available under the 2017 Equity Plan by the end of 2019, although we cannot predict the level of future equity awards. We also intend for the share reserve to have a sufficient number of shares in the event that we hire senior level employees in the next few years, in order to be able to provide a competitive new hire package to recruit them to join us. We believe that the 2017 Equity Plan’s proposed share reserve described above (and detailed below under “-Authorized Shares”) will be sufficient to help us continue to achieve our goals of attracting, motivating and retaining new personnel, including senior level employees.

•	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).

•

Unlike the Existing Plan, 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. Because the Existing Plan has an annual “evergreen” provision and the 2017 Equity Plan does not, the replacement of the Existing Plan with the 2017 Equity Plan effectively would have a long-term net effect of reducing the number of shares that will be available for issuance under the Company’s equity plans without further approval of our Board or Compensation Committee and our stockholders.

•	The initial number of shares to be reserved under the 2017 Equity Plan will be no greater than the total number of shares already reserved under the Existing Plan as of the time the 2017 Equity Plan becomes effective.

•	Stock options and stock appreciation rights granted under the 2017 Equity Plan may not be repriced without stockholder approval of an “Exchange Program” (as defined in the 2017 Equity Plan).

•	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.

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•

In order to make awards that qualify for exemption from Section 162(m), 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.

•	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.

•	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.

•	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.

•	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.

•	The 2017 Equity Plan does not provide for, or authorize, any tax gross-ups.

•	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.

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•	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.

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•	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.

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*	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 15, 2017, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after March 15, 2017.

(2)

Comprised of 119,241 shares held directly, 2,320,692 shares held in three trusts for which Mr. Kiani is the sole trustee, 1,491,209 shares held in three 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 1,980,000 shares of Masimo common stock that were exercisable as of March 15, 2017 or that have or will become exercisable within 60 days after March 15, 2017, and 10,373 shares held for the Reporting Person’s account under the Masimo Retirement Savings Plan. As of March 15, 2017, an aggregate of 1,432,209 shares of common stock owned by the Kiani Family Remainder Trust and beneficially owned by Mr. Kiani were pledged as collateral for a personal loan issued to the trustee of the Kiani Family Remainder Trust. See “Executive Compensation—Compensation Discussion and Analysis—Other Compensation Policies and Practices” on page 55 of this Proxy Statement.

(3)	Comprised of 6,000 shares of common stock held directly, 2,660 shares held for Mr. de Raad’s account under our Retirement Savings Plan and options to purchase 48,000 shares of common stock that are exercisable within 60 days after March 15, 2017.

(4)	Comprised of 69,000 shares of common stock held directly and options to purchase 144,000 shares of common stock that are exercisable within 60 days after March 15, 2017.

(5)	Comprised of options to purchase 50,000 shares of common stock that are exercisable within 60 days after March 15, 2017.

(6)	Comprised of 10,000 shares of common stock held directly and options to purchase 144,000 shares of common stock that are exercisable within 60 days after March 15, 2017.

(7)	Comprised of 60,000 shares of common stock held directly, options to purchase 108,000 shares of common stock that are exercisable within 60 days after March 15, 2017 and 3,249 shares subject to RSUs that will vest within 60 days after March 15, 2017.

(8)	Comprised of 83,000 shares of common stock held directly, options to purchase 68,000 shares of common stock that are exercisable within 60 days after March 15, 2017 and 3,249 shares subject to RSUs that will vest within 60 days after March 15, 2017.

(9)	Comprised of 3,385 shares of common stock held directly.

(10)	Comprised of options to purchase 60,000 shares of common stock that are exercisable within 60 days after March 15, 2017.

(11)

Comprised of shares included under “Named Executive Officers and Directors”, 26,719 shares of common stock owned directly by two of our executive officers, 504 shares held for by one of our executive officers under our Retirement Savings Plan and options to purchase an aggregate of 244,303 shares of common stock held by two of our other executive officers that are exercisable within 60 days after March 15, 2017.

(12)	BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on January 12, 2017, reporting that it had sole dispositive power with respect to an aggregate of 6,794,388 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 10022.

(13)

The Vanguard Group (“Vanguard”) filed a Schedule 13G/A on February 10, 2017, reporting that it had sole voting power with respect to 82,668 shares, shared voting power with respect to 5,900 shares, sole dispositive power with respect to 4,272,780 shares, shared dispositive power with respect to 86,134 shares and beneficial ownership of an aggregate of 0 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.

(14)

Janus Capital Management LLC (“Janus”) filed a Schedule 13G/A on February 13, 2017, reporting that it had sole voting and dispositive power with respect to an aggregate of 2,703,291 shares in its capacity as an investment adviser in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act and as a parent holding company or control person in accordance with Rule 13d-1(b)(1)(ii)(G) under the Exchange Act. Janus’ address is 151 Detroit Street, Denver, Colorado 80206.

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(1)	Comprised of the 2004 Incentive Stock Option Nonqualified Stock Option and Restricted Stock Purchase Plan and the 2007 Stock Incentive Plan (the “2007 Plan”).

(2)

Includes 2,709,883 Restricted Share Units that were unvested and outstanding as of January 2, 2016. The remaining amount of 4,327,603 represents shares available for future issuance under the 2007 Plan. Pursuant to the terms of the 2007 Plan, the share reserve of the 2007 Plan will automatically increase on the first day of each fiscal year, through fiscal 2017, by three percent of the aggregate number of shares of our common stock outstanding as of the last day of the immediately preceding fiscal year, or such lesser amount, including zero, determined by our Board or our Compensation Committee prior to the commencement of the fiscal year.

(3)	As of December 31, 2016, we did not have any equity compensation plans that were not approved by our stockholders.

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•	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 security holders receive the same benefit on a pro rata basis.

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•	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”).

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