~~Chairman~~Table of FoxHollow Technologies, Inc., a public company that designed, developed, manufactured and sold medical devices, from June 2004 until October 2007. He also served as a director and Audit Committee Chairman of Conceptus, Inc., a public medical device company, from December 1994 until April 2004. Mr. Fitch was Chief Financial Officer and Senior Vice President of Operations of Conceptus, Inc. from December 1994 through October 1998. Mr. Fitch also served as Chief Financial Officer of several start-up technology companies from 1998 until 2002. From December 1990 to January 1994, Mr. Fitch served as Chief Financial Officer of SanDisk Corp., a manufacturer of flash memory devices. From 1983 through 1989, Mr. Fitch was the Chief Financial Officer of Komag Inc., a manufacturer of rigid thin film media for the disk drive industry. Mr. Fitch holds a B.S. in Chemistry and an M.B.A. from Stanford University. Our Nominating, Compliance and Corporate Governance Committee finds Mr. Fitch’s financial background to be extremely helpful to the Board and suited to his role as Chairperson of our Audit Committee. Mr. Fitch brings to us previous experience as a Chief Financial Officer for multiple companies over his long career, and as audit committee chairperson of a public company, which uniquely qualifies him to serve as our Audit Committee Chairperson. In addition to his leadership and management skills, Mr. Fitch has considerable financial, auditing, risk management and corporate governance experience and he is an audit committee financial expert under the rules of the SEC, all of which enable him to make valuable contributions to the Board and the Audit Committee.Contents

~~THE BOARD OF DIRECTORS RECOMMENDS~~

~~A VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE.~~

~~Directors Continuing in Office Until the 2015 Annual Meeting of Stockholders~~

~~Edward L. Cahill~~, age 60, has served as a member of our Board since January 1999. Mr. Cahill has served as Managing Partner of HLM Venture Partners, a venture capital firm that invests primarily in emerging companies focused on health care information technology, health care services and medical technology, since May 2000. From June 1995 to May 2000, Mr. Cahill served as a founding partner of Cahill, Warnock & Company (now Camden Partners), a Baltimore venture capital firm. Previously, Mr. Cahill was a Managing Director of Alex, Brown & Sons, an investment services brokerage, where he headed the firm’s health care group from January 1986 through March 1995. Since May 2009, Mr. Cahill has been a director and a member of the audit committee of Tandem Diabetes Care, Inc., a publicly-traded medical device company that designs, develops and commercializes products for people with insulin-dependent diabetes. He is also a director of several private health care companies and serves as a trustee of Johns Hopkins Medicine, Johns Hopkins Health System and Mercy Health Services. Mr. Cahill holds an A.B. in American Civilization from Williams College and a Master of Public and Private Management degree from Yale University. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Cahill’s diverse and extensive board of directors and management experience, which has included public and private companies in the life sciences industry, provides him with key skills in working with directors, understanding board process and functions and working with financial statements. He brings to our Board the perspective of an experienced long-term investor in numerous biotechnology companies, as well as a strong financial management background, all of which qualify him for our Audit Committee. In addition, Mr. Cahill has extensive experience with mergers and acquisitions.

~~Robert Coleman~~, Ph.D., age 68, has served as a member of our Board since February 1997. Since October 1997, Dr. Coleman has served as Chairman of WaveSense, a developer of analytical nanotechnologies for use in cellular and molecular assay markets. In December 2010, Dr. Coleman became a board member at Therix Medical Development, Ltd., an early stage technology development and investment company focused on medical devices and diagnostics. In February 2011, Dr. Coleman became Chairman and CEO of Bluegrass Vascular Technologies, a company focused on solving difficult central venous access problems. He also served as a board member of SensAble Technologies, a developer of 3D touch-enabled (force feedback) solutions and technology, from April 1996 to November 2011 and as a board member of IntelliDX Inc., a developer of automated bedside blood analyzers, from August 2008 to January 2010. Dr. Coleman was a member of the board of directors of VivoMedical Inc., an early-stage medical device company that develops non-invasive glucose monitors, from October 2006 to February 2009. Dr. Coleman was President and CEO of MediSense, Inc., a manufacturer of blood glucose self-testing devices, from 1991 to May 1996, and President of MediSense, Inc., an Abbott Laboratories Company, from June 1996 to December 1996. He co-founded Nova Biomedical Corporation, a manufacturer of clinical laboratory equipment, and served as its President and CEO from April 1976 to August 1991. Dr. Coleman holds a B.S. in Chemistry from Morehead State University and a Ph.D. in Analytical Chemistry from the University of Tennessee. Our Nominating, Compliance and Corporate Governance Committee believes Dr. Coleman’s diverse and far-ranging executive and operational experience as a Chief Executive Officer of multiple companies, including MediSense and Nova Biomedical, has provided him with a deep understanding of overseeing compensation practices and finance matters, and qualifies him to serve as a member of our Audit Committee and Nominating, Compliance and Corporate Governance Committee and as the Chairperson of our Compensation Committee. In addition, Dr. Coleman’s analytical skills and broad experience with life sciences companies allows him to assist our Board in evaluating and refining our business strategies and commercial objectives.

Sanford Fitch, has served as a member of our Board since November 2006. Mr. Fitch has served as a director, Audit Committee Chairman and member of the Compensation Committee of Iridex Corp., a public company that designs, develops, manufactures and sells medical laser systems since 2004. Mr. Fitch served as a director and Audit Committee Chairman of FoxHollow Technologies, Inc., a public company that designed, developed, manufactured and sold medical devices, from June 2004 until October 2007. He also served as a director and Audit Committee Chairman of Conceptus, Inc., a public medical device company, from December 1994 until April 2004, where he also served as its Chief Financial Officer and Senior Vice President of Operations from December 1994 through October 1998. Mr. Fitch has also served as the Chief Financial Officer of several start-up technology companies from 1998 until 2002 and of various public technology companies from 1983 to 2002. Mr. Fitch holds a B.S. in Chemistry and an M.B.A. from Stanford University. Our Nominating, Compliance and Corporate Governance Committee finds Mr. Fitch’s financial background to be extremely helpful to the Board and suited to his role as Chairperson of our Audit Committee. Mr. Fitch brings to us previous experience as a Chief Financial Officer for multiple companies over his long career, and as audit committee chairperson of public companies, which uniquely qualifies him to serve as our Audit Committee Chairperson. In addition to Mr. Fitch’s prior leadership and management experience working with medical technology companies, Mr. Fitch has considerable financial, auditing, risk management and corporate governance experience and he is an audit committee financial expert under the rules of the SEC, all of which enable him to make valuable contributions to the Board, the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees.

Thomas Harkin, has served as a member of our Board since December 2015. Mr. Harkin, formerly a five-term U.S. Senator from the State of Iowa, retired from the U.S. Senate in January 2015. Senator Harkin was first elected to the U.S. House of Representatives in 1974, and 10 years later, he was elected to the U.S. Senate. Prior to his service in the House of Representatives, Mr. Harkin served in the U.S. Navy and achieved the rank of lieutenant commander. Mr. Harkin holds a B.S. from Iowa State, a J.D. from Catholic University of America and was admitted to the Iowa Bar in 1972. Mr. Harkin’s experience in the Senate, and in particular his work on healthcare-related legislation, as well as his extensive understanding of the healthcare system in the U.S., bring a unique perspective and insight to the Board and the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees.

Craig Reynolds, has served as a member of our Board since April 2014. Mr. Reynolds has served as a director of Symmetry Medical, Inc. since January 4, 2008, and is currently Chairman of the Board of Symmetry Surgical, Inc. He is currently Chief Executive Officer and a director of Cereve, Inc., a medical company engaged in resolving insomnia issues. Prior to joining Cereve, Mr. Reynolds served as Chief Operating Officer of Philips-Respironics Home Health Solutions (“Philips-Respironics”), a subsidiary of Philips, from 2008 to 2010. Prior to Philips-Respironics, Mr. Reynolds was the Chief Operating Officer and a board member of Respironics, Inc., a company that develops, manufactures and markets medical devices worldwide, from 1998 to 2008. From 1993 to 1998, Mr. Reynolds was with Healthdyne Technologies, Inc., a medical device company, serving for five years as Chief Executive Officer and director. From 1981 through 1992, Mr. Reynolds was with Healthdyne, Inc. in the positions of Executive V.P. (1981 to 1983), President of Healthdyne Cardiovascular Division (1984 to 1985) and President of Healthdyne Homecare Division (1986 to 1992). Mr. Reynolds earned his B.S. in Industrial Management from the Georgia Institute of Technology and his M.B.A. from Georgia State University. Our Nominating, Compliance and Corporate Governance Committee believes Mr. Reynolds’ experience with other medical device companies allow him to provide additional insight to the Board on strategy decisions as well as make valuable contributions to the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees.

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~~Directors Continuing in Office Until the 2016 Annual Meeting of Stockholders~~

~~Joe Kiani~~, age 49, is the founder of Masimo and has served as Chief Executive Officer and Chairman of the Board since our inception in 1989. He is an inventor on more than 50 patents related to signal processing, sensors and patient monitoring, including patents for the invention of measure-through motion and low-perfusion pulse oximetry. From 1998 to March 2013, Mr. Kiani served on the Board of Directors of Saba Software, Inc., a publicly-traded software company focused on human capital development and management solutions. Mr. Kiani holds a B.S.E.E. and an M.S.E.E. from San Diego State University. As Masimo's founder, Chief Executive Officer and Chairman of the Board of Directors 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. Mr. Kiani is critical to the Company’s continued development and growth. He also brings to the Board his experience in serving as the Chairman of a non-profit organization.

~~Jack Lasersohn~~, age 61, has served as a member of our Board since January 1995. Mr. Lasersohn has been a general partner, or a principal of the general partner, of The Vertical Group, L.P., a private venture capital firm that is focused on the fields of medical technology and biotechnology. He has over 30 years of experience in health care venture capital investments. Prior to joining The Vertical Group’s predecessor, F. Eberstadt, in 1981, Mr. Lasersohn was a corporate attorney with Cravath, Swaine & Moore LLP. Mr. Lasersohn has served on the Board of OncoMed Pharmaceuticals, Inc., a publicly-traded clinical development-stage biopharmaceutical company, since July 2005. From June 2007 to September 2009, he served as a director of ALUS Liquidation Corp., formerly known as Alsius Corporation, a medical device company that was publicly-traded until May 2009. In addition, Mr. Lasersohn served as a director of Metabolix Inc., a publicly-traded biotechnology company, from December 1999 to May 2008. He also serves on the boards of a number of private medical device and biotechnology companies. Mr. Lasersohn is the past Chairman of the Medical Industry Group of the National Venture Capital Association (“NVCA”) and previously served on the Executive Committee of the Board of Directors of the NVCA. Mr. Lasersohn has also served, by appointment, on various committees advising the FDA and Medicare. He holds a B.S. in Physics from Tufts University, an M.A. from The Fletcher School of Law and Diplomacy, and a J.D. from Yale Law School. The totality of his professional experience, which has provided him with extensive expertise in medical device, biotechnology and other life sciences companies, has provided Mr. Lasersohn with the background and experience of board processes, function, compensation practices and oversight of management, which is valuable to the Board and the Compensation Committee, and in his role as Chairperson of the Nominating, Compliance and Corporate Governance Committee. Mr. Lasersohn also brings to the Board his experience in serving on the boards of directors and key committees of other public companies throughout his career, including a number of life sciences companies, which is important during Board discussions regarding our strategy and business operations.

~~Craig Reynolds~~, age 65, has served as a member of our Board since April 2014. Mr. Reynolds has served as a director of Symmetry Medical, Inc. since January 4, 2008, and is currently Chairman of the Board of Symmetry Medical, Inc. He is currently Chief Executive Officer and a director of Cereve, Inc., a medical company engaged in resolving insomnia issues. Prior to joining Cereve, Mr. Reynolds served as chief operating officer of Philips-Respironics Home Health Solutions (“Philips-Respironics”), a subsidiary of Philips, from 2008 to 2010. Prior to Philips-Respironics, Mr. Reynolds was the chief operating officer and a board member of Respironics, Inc., a company that develops, manufactures and markets medical devices worldwide. The product lines of Respironics, Inc. included sleep medicine therapeutics and diagnostic equipment, intensive care ventilation, patient monitoring and respiratory drug delivery systems. Mr. Reynolds was with Respironics, Inc. since 1998. From 1993 to 1998, Mr. Reynolds was with Healthdyne Technologies, Inc., a medical device company, serving for five years as chief executive officer and director. From 1981 through 1992, Mr. Reynolds was with Healthdyne, Inc.in the positions of Executive VP (1981 to 1983), president of Healthdyne Cardiovascular Division (1984 to 1985) and president of Healthdyne Homecare Division (1986 to 1992). Mr. Reynolds earned his B.S. in industrial management from the Georgia Institute of Technology and his M.B.A. from Georgia State University.

~~INFORMATION REGARDING THE~~CORPORATE GOVERNANCE AND BOARD ~~OF DIRECTORS AND CORPORATE GOVERNANCE~~

~~General~~MATTERS

This section describes key corporate governance guidelines and practices that we have adopted. Complete copies of our Corporate Governance Guidelines, the charters of the committees of our Board and our Code of Business Conduct and Ethics described below may be viewed on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate ~~Governance.”~~Governance”. Alternately, you can request a copy of any of these documents free of charge by writing to our Corporate Secretary, c/o Masimo Corporation, ~~40 Parker,~~52 Discovery, Irvine, California 92618.

Corporate Governance Guidelines

Our Board has adopted ~~corporate governance guidelines~~Corporate Governance Guidelines to ~~assist~~ensure that our Board will have the ~~Board~~necessary authority and practices in ~~the~~place to exercise of its duties and responsibilities, review and evaluate our business operations as needed, to make decisions that are independent of our management and to serve the best interests of Masimo and our stockholders. These ~~guidelines, which~~Corporate Governance Guidelines provide a framework for the conduct of the Board’s business, and provide that:

~~it is our policy that~~ 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;~~Board, and all our directors currently satisfy this requirement;

~~we encourage~~ outside directors ~~to purchase and~~must own a minimum number of shares of our common ~~stock;~~stock (see “Executive Compensation— Non-Employee Director Stock Ownership Policy” on page 21 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, ~~does not endorse~~unless our Board waives this term ~~limits on directors.~~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.

The Corporate Governance Guidelines also set forth the practices our Board will follow with respect to Board composition and selection, Board meetings and Board committees, and Chief Executive Officer performance evaluation and compensation. Our Board adopted the Corporate Governance Guidelines to, among other things, reflect changes to The NASDAQ Stock Market, LLC (“NASDAQ”) listing standards and SEC rules.

Independence of the Board of Directors

Our Board has the responsibility for establishing corporate policies and for the overall performance of the Company, although it is not involved in day-to-day operations. As required under the ~~marketplace~~NASDAQ rules, ~~of The NASDAQ Stock Market LLC (“NASDAQ”),~~ a majority of the members of a listed company’s board of directors must qualify as ~~“independent,”~~“independent”, as affirmatively determined by our Board. Our Board consults with our counsel to ensure that the Board’s determinations are consistent with all relevant securities and other laws and regulations regarding the definition of ~~“independent,”~~“independent”, including those set forth in applicable NASDAQ rules, as in effect from time to time. Consistent with these considerations, after review of all relevant transactions or relationships between each director, or any of his family members, and Masimo, our senior management and our independent registered public accounting firm, our Board has determined that all of our directors other than Mr. Kiani and Dr. Barker are independent, as defined in NASDAQ Listing Rule 5605(a)(2).

Board Leadership Structure

Our Board believes that our Chief Executive Officer is best situated to serve as Chairman because he is the director ~~that~~who is most familiar with our business and industry, possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing us and is therefore best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. Our independent directors bring experience, oversight and expertise from outside the ~~company~~Company and industry, while the Chief Executive Officer brings ~~company-specific~~Company-specific experience and expertise. The Board believes that the combined role of Chairman and Chief Executive

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Officer facilitates information flow between management and the Board, which is essential to effective governance. The Company has no lead independent director.

Board’s Role in Risk Oversight

Our Board has an active role, as a whole and also at the committee level, in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. Our Audit Committee oversees management of financial risks and our Nominating, Compliance and Corporate Governance Committee oversees management of risks associated with environmental, health, safety and other non-financial concerns and manages risks associated with the independence of the Board and potential conflicts of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our entire Board is informed about such risks by the committees.

~~Information Regarding the Board of Directors~~

~~We are committed to maintaining the highest standards of business conduct~~Meetings and ethics. Our Board has adopted Corporate Governance Guidelines to assure that our Board will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The guidelines are also intended to align the interests of directors and management with those of our stockholders. The Corporate Governance Guidelines set forth the practices our Board will follow with respect to board composition and selection, board meetings and board committees, Chief Executive Officer performance evaluation and compensation. Our Board adopted the Corporate Governance Guidelines to, among other things, reflect changes to the NASDAQ listing standards and SEC rules adopted to implement provisions of the Sarbanes-Oxley Act of 2002, as amended. Our Corporate Governance Guidelines may be viewed on our Internet website at http://ir.masimo.com under “Corporate Governance.”

~~Meetings~~Sessions

Our Board meets on a regular basis throughout the year to review significant developments affecting the Company and to act upon matters requiring its approval. Our Board also holds special meetings, as required from time to time, when important matters arise requiring Board action between scheduled meetings. During fiscal year ~~2013,~~2015, our Board met ~~nine~~eighteen times and acted by unanimous written consent ~~one time.~~once. None of our directors ~~other than Mr. Fitch,~~ attended fewer than 75% of the total number of meetings held by the Board and the committees (on which and for the period during which the director served) during fiscal year ~~2013.~~

~~Executive Sessions~~2015, except for Mr. Harkin, who was, due to scheduling conflicts and prior commitments, unable to attend the single meeting of the Board and the single meeting of the Compensation Committee held on the day following his appointment to the Board. These meetings were scheduled by the Board and the Compensation Committee prior to the date of Mr. Harkin’s appointment.

As required under applicable NASDAQ listing standards, our independent directors periodically meet in executive ~~session~~sessions at which only they are present.

Policy Regarding Board Member Attendance at Annual Meetings

It is the policy of our Board to invite directors and nominees for director to attend annual meetings of our stockholders. We held one annual meeting of stockholders in fiscal year ~~2013.~~2015, which was attended by Mr. ~~Kiani was the only member of our Board who attended the meeting.~~Kiani.

Information Regarding Board Committees

Our Board has established a standing Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee to devote attention to specific subjects and to assist it in the discharge of its responsibilities. All three committees operate under a written charter adopted by our Board, each of which is available on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate ~~Governance.”~~Governance”. The following table provides membership and meeting information for fiscal year ~~2013~~2015 for the Audit Committee, Compensation Committee and Nominating, Compliance and Corporate Governance Committee.

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Name Audit Compensation
Nominating, Compliance and
Corporate Governance⁽²⁾

Employee Director:
Joe Kiani —
—
—

Non-Employee Directors:
Steven J. Barker, Ph.D., M.D. —
—
⁽²⁾
—
⁽²⁾
Edward L. Cahill X
—
X

Robert Coleman, Ph.D. X
X
⁽¹⁾
X

Sanford Fitch X
⁽¹⁾
—
—

Jack Lasersohn —
X
X
⁽¹⁾
Craig Reynolds⁽³⁾
X
X

Total meetings in fiscal year 2013 4
8
4

Total actions by written consent in fiscal year 2013 —
4
—

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Name	Audit		Compensation		Nominating, Compliance and Corporate Governance
Employee Director:
Joe Kiani	—		—		—
Non-Employee Directors:
Steven J. Barker, Ph.D., M.D.⁽¹⁾	—		—		—
Robert Coleman, Ph.D.⁽²⁾	X	⁽²⁾	X	^{(2), (3)}	X	⁽²⁾
Sanford Fitch	X	⁽⁴⁾	X	⁽⁵⁾	X	⁽⁶⁾
Thomas Harkin⁽⁷⁾	X	⁽⁷⁾	X	⁽⁷⁾	X	^{(4), (7), (8)}
Jack Lasersohn	X	⁽⁹⁾	X	⁽¹⁰⁾	X	⁽¹¹⁾
Craig Reynolds	X		X	^{(4), (12)}	X	^{(2), (13)}
Total meetings in fiscal year 2015	—		—		—

___________


⁽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⁾	Dr. Coleman’s service on the Board and related committees ended when his term expired at the 2015 Annual Meeting of Stockholders on June 2, 2015.


⁽³⁾	Dr. Coleman served as Chairperson of the Compensation Committee until May 4, 2015.


⁽⁴⁾	Committee Chairperson.


⁽²⁾⁽⁵⁾	~~Effective October 24, 2013, Dr. Barker resigned from~~Mr. Fitch was appointed to the Compensation Committee on February 26, 2015.


⁽⁶⁾	Mr. Fitch was appointed to the Nominating, Compliance and Corporate Governance Committee on May 4, 2015.


⁽⁷⁾	Mr. Harkin was appointed to our Board on December 16, 2015, at which time he also joined the Audit Committee, the Compensation Committee and the Nominating, Compliance and Corporate Governance Committee. ~~Since July 2013, Dr. Barker has served as our acting Chief Medical Officer.~~


⁽³⁾⁽⁸⁾	Mr. Harkin was appointed as Chairperson of the Nominating, Compliance and Corporate Governance Committee on February 11, 2016.


⁽⁹⁾	Mr. Lasersohn served on the Audit Committee from September 11, 2015 through December 16, 2015.


⁽¹⁰⁾	Mr. Lasersohn served on the Compensation Committee until February 26, 2016.


⁽¹¹⁾	Mr. Lasersohn served on the Nominating, Compliance and Corporate Governance Committee and as its Chairperson until March 20, 2015.


⁽¹²⁾	Mr. Reynolds was appointed ~~to our Board effective April 3, 2014, at which time he also joined~~ the ~~Audit Committee and~~Chairperson of the Compensation ~~Committee.~~Committee on May 4, 2015.

Below is a description of each committee of our Board. Each of the committees has authority to engage legal counsel or other experts or consultants, as it deems appropriate to carry out its responsibilities. The Board has determined that each member of each committee meets the applicable rules and regulations regarding “independence” and that each member is free of any relationship that would interfere with his individual exercise of independent judgment with regard to Masimo.


⁽¹³⁾	Mr. Reynolds was appointed as a member of the Nominating, Compliance and Corporate Governance Committee on March 20, 2015 and served as its Chairperson from March 20, 2015 until February 11, 2016.

Audit Committee

We have a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Audit Committee is currently comprised of Mr. ~~Cahill, Dr. Coleman,~~Fitch, Mr. ~~Fitch~~Reynolds and Mr. ~~Reynolds.~~Harkin. Mr. Fitch serves as the Chairperson of the Audit Committee. The functions of this Committee include, among others:

~~evaluating our independent registered public accounting firm’s qualifications, independence~~appointing, retaining and ~~performance as our independent registered public accounting firm;~~

determining the ~~engagement~~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 ~~retention~~qualifications, performance and independence of our independent registered public accounting firm;

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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 ~~perform any proposed audit and permissible non-audit services;~~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;

~~establishing~~reviewing and ~~overseeing the processes and procedures for the receipt and treatment of any complaints regarding accounting, internal controls or audit matters;~~

~~reviewing our financial statements;~~

~~reviewing our critical accounting policies and estimates;~~

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.

Typically, the Audit Committee meets at least quarterly and with greater frequency if necessary. Our Board has adopted a written charter of the Audit Committee that is available to stockholders on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate ~~Governance.”~~Governance”.

Under the applicable rules and regulations of NASDAQ, each member of a company’s audit committee must be considered independent in accordance with NASDAQ Listing Rule 5605(c)(2)(A)(i) and (ii) and Rule 10A-3(b)(1) under the Exchange Act. Our Board reviews the NASDAQ listing rules and standards and Exchange Act definitions of independence for Audit Committee members on an annual basis and has determined that all members of the Company’s Audit Committee are independent (as independence is currently defined in NASDAQ Listing Rule 5605(c)(2)(A)(i) and (ii)). Our Board has determined that all members of our Audit Committee also meet the requirements for financial literacy under the NASDAQ Listing Rules.

Our Board has determined that Mr. Fitch, the Chairperson of our Audit Committee, is an audit committee financial expert, as defined under applicable SEC rules, and that Mr. Fitch meets the background and financial sophistication requirements under NASDAQ Listing Rule 5605(c)(2)(A). In making this determination, the Board made a qualitative assessment of Mr. Fitch’s level of knowledge and experience based on a number of factors, including his formal education and experience. Both our independent registered public accounting firm and internal financial personnel regularly meet privately with our Audit Committee and have unrestricted access to this committee.

~~AUDIT COMMITTEE REPORT~~

Our Audit Committee is composed of “independent directors,” as determined in accordance with NASDAQ Listing Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. The Audit Committee operates pursuant to a written charter adopted by the Board, a copy of which may be viewed on our Internet website at http://ir.masimo.com under “Corporate Governance.”

As described more fully in its charter, the purpose of the Audit Committee is to assist our Board with its oversight responsibilities regarding the integrity of our financial statements, assessing the independent registered public accounting firm’s qualifications and independence and the performance of the persons performing internal audit duties for us and the independent registered public accounting firm. Management is responsible for the preparation, presentation and integrity of our financial statements as well as our financial reporting process, accounting policies, internal audit function, internal accounting controls and disclosure controls and procedures. The independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with generally-accepted auditing standards and to issue a report thereon. The Audit Committee’s responsibility is to monitor and oversee these processes. The following is the Audit Committee’s report submitted to the Board for fiscal year 2013.

~~The Audit Committee has:~~

~~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.

~~In addition, the Audit Committee has met separately with management and with Grant Thornton LLP as part of the committee’s quarterly meetings.~~

Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 28, 2013 for filing with the Securities and Exchange Commission. The Audit Committee also has selected and engaged Grant Thornton LLP as Masimo’s independent registered public accounting firm for the fiscal year ending January 3, 2015, and is seeking ratification of the selection by Masimo’s stockholders.



	~~Audit Committee~~⁽¹⁾

	~~Mr. Sanford Fitch~~
	~~Mr. Edward L. Cahill~~
	~~Dr. Robert Coleman~~

This foregoing audit committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.

~~__________________~~

⁽¹⁾Craig Reynolds was appointed to the Audit Committee on April 3, 2014 and, accordingly, did not participate in the reviews and discussions of the Audit Committee described in this Audit Committee Report.

Compensation Committee

Our Compensation Committee is currently comprised of ~~Dr. Coleman,~~ Mr. ~~Lasersohn~~Fitch, Mr. Harkin and Mr. Reynolds. ~~Dr. Coleman~~Mr. Reynolds currently serves as the Chairperson of our Compensation Committee. The functions of this committee include, among others:

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;

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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;

acting as the administering committee of our Board for our ~~stock~~executive compensation and ~~bonus~~cash incentive plans and for any equity ~~or cash compensation arrangements,~~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.

Our Board has adopted a written charter of the Compensation Committee that is available to stockholders on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate ~~Governance.”~~Governance”. Our Board has determined that all members of our Compensation Committee are independent (as independence is currently defined in NASDAQ Listing Rule 5605(a)(2)). The Compensation Committee meets from time to time during the year. The agenda for each meeting is usually developed by the Chairperson of the Compensation Committee, in consultation with our Chief Executive Officer and other representatives of senior management and human resources as necessary. The Chief Executive Officer may not participate in or be present during any deliberations or determinations of the Compensation Committee regarding his compensation. The charter of the Compensation Committee grants the Compensation Committee full access to all of our books, records, facilities and personnel. The Compensation Committee has the authority, in its sole discretion, to retain and terminate (or obtain the advice of) any ~~advisor~~adviser to assist it in the performance of its duties, but only after taking into consideration factors relevant to the adviser’s independence ~~from management~~ specified in NASDAQ Listing Rule 5605(d)(3). The Compensation Committee will be directly responsible for the appointment, compensation and oversight of the work of any adviser retained by the Compensation Committee, and will have sole authority to approve the adviser’s fees and the other terms and conditions of the adviser’s retention.

~~The Compensation Committee is authorized~~Since September 2012, Frederic W. Cook & Co., Inc. (“FW Cook”) has provided compensation consulting services to ~~retain the services of independent advisors to assist it in carrying out its responsibilities. To~~ assist management and the Compensation Committee in assessing and determining competitive compensation ~~packages, in September 2012, the Compensation Committee retained Frederic W. Cook & Co., Inc. (“FW Cook”) to provide compensation consulting services.~~packages. FW Cook is independent from Masimo and has received compensation from Masimo only for services provided to the Compensation Committee. For more information regarding the Compensation Committee’s engagement of FW Cook, see ~~“Compensation of Executive Officers—~~“Executive Compensation—Compensation Discussion and ~~Analysis—Executive Summary”~~Analysis” below.

The Compensation Committee meets outside the presence of all of our executive officers, including the named executive officers, in order to consider appropriate compensation for our Chief Executive Officer. For all other named executive officers, the Compensation Committee meets outside the presence of all executive officers except our Chief Executive Officer. The annual performance reviews of our executive officers are considered by the Compensation Committee when making decisions on setting base salary, targets for and payments under our bonus plan and grants of equity incentive awards. When making decisions on executive officers, the Compensation Committee considers the importance of the position

~~to us, the past salary history of the executive officer and the contributions we expect the executive officer to make to the success of our business going forward.~~

~~The~~ specific determinations of the Compensation Committee with respect to executive compensation for fiscal year ~~2013~~2015 are described in greater detail in the “Compensation Discussion and Analysis” section of this Proxy Statement.

~~Compensation Committee Interlocks and Insider Participation~~

In fiscal year 2013, our Compensation Committee consisted of Drs. Barker and Coleman and Mr. Lasersohn. Dr. Barker served as a member of our Compensation Committee until October 24, 2013 and became a consultant of ours in July 2013 as our acting Chief Medical Officer. Mr. Reynolds was appointed to our Compensation Committee on April 3, 2014. There are no relationships between the current members of the Compensation Committee and our executive officers of the type contemplated in the SEC’s rules requiring disclosure of “compensation committee interlocks.” None of the current members of the Compensation Committee is our employee and no current member has been an officer of Masimo at any time.

Cercacor Laboratories, Inc. (“Cercacor”) is an independent entity spun off from us to our stockholders in 1998. Joe Kiani and Jack Lasersohn, members of our Board, are also members of the board of directors of Cercacor. Joe Kiani, our Chairman and Chief Executive Officer, is also the Chairman and Chief Executive Officer of Cercacor. Mr. Lasersohn is a member of our compensation committee. We are a party to a cross-licensing agreement with Cercacor, which was amended and restated effective January 1, 2007 (the “Cross-Licensing Agreement”), that governs each party’s rights to certain of the intellectual property held by the two companies. To date, the Company has developed and commercially released devices that measure carbon monoxide, methemoglobin and hemoglobin using licensed rainbow^®technology. In December 2013, Masimo exercised its right to acquire the licensing rights to five additional parameters at a predetermined cost of $0.5 million per license. Pursuant to the Cross-Licensing Agreement, we are currently subject to certain specific minimum royalty payment obligations of $5.0 million per year. Actual aggregate royalty payment liabilities were $5.4 million for the fiscal year ended December 28, 2013. To accelerate the product development of Masimo’s total hemoglobin spot check measurement device, in February 2009, Masimo agreed to fund additional Cercacor engineering expenses. Specifically, these expenses included third party engineering materials and supplies expense as well as 50% of total Cercacor engineering and engineering related payroll expenses from April 2009 until completion of the product development efforts. Beginning in 2012, due to a revised estimate of the support required by Masimo to complete the various total hemoglobin related projects, Masimo’s Board approved an increase in the percentage of Cercacor’s total engineering and engineering related payroll expenses funded by Masimo from 50% to 60%. These expenses totaled $4.1 million for the fiscal year ended December 28, 2013.| 2016 Proxy Statement

~~COMPENSATION COMMITTEE REPORT~~

~~The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b)~~Table of Regulation S-K of the SEC’s rules and regulations with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the fiscal year ended December 28, 2013.Contents



	~~Compensation Committee~~

	~~Dr. Robert Coleman~~
	~~Mr. Jack Lasersohn~~
	~~Mr. Craig Reynolds~~

This foregoing compensation committee report is not “soliciting material,” is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.

Nominating, Compliance and Corporate Governance Committee

Our Nominating, Compliance and Corporate Governance Committee is currently comprised of ~~Dr. Coleman~~Mr. Reynolds, Mr. Fitch and Mr. ~~Lasersohn.~~Harkin. Mr. ~~Lasersohn~~Harkin currently serves as the Chairperson of our Nominating, Compliance and Corporate Governance Committee. The functions of this committee include, among others:

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 ~~recommend~~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;

~~evaluating~~identifying, reviewing, considering and ~~recommending~~evaluating candidates for election to the Board ~~consistent with criteria approved by~~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 ~~Board;~~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 ~~evaluate~~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.

Our Board has adopted a written charter of the Nominating, Compliance and Corporate Governance Committee that is available to stockholders on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate ~~Governance.”~~Governance”. Our Board has determined that all members of our Nominating, Compliance and Corporate Governance Committee are independent (as independence is currently defined in NASDAQ Listing Rule 5605(a)(2)). The Nominating, Compliance and Corporate Governance Committee meets from time to time as it deems appropriate or necessary.

Consideration of Director Nominees

Director Qualifications

There are no specific minimum qualifications that the Board requires to be met by a director nominee recommended for a position on our Board, nor are there any specific qualities or skills that are necessary for one or more members of our Board to possess, other than as are necessary to meet the requirements of the rules and regulations applicable to us. The Nominating, Compliance and Corporate Governance Committee may consider a potential director candidate’s experience, areas of expertise and other factors relative to the overall composition of our Board and its committees, including the following characteristics:

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

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

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 Nominating, Compliance and Corporate Governance Committee retains the right to modify these criteria from time to time.

Security Holder Nominations

The Nominating, Compliance and Corporate Governance Committee will consider director candidates recommended by our stockholders of record. The Nominating, Compliance and Corporate Governance Committee does not intend to alter the manner in which it evaluates candidates, including the criteria set forth above, based on whether a candidate was recommended by a stockholder of record or not. Stockholders of record who wish to recommend individuals for consideration by the Nominating, Compliance and Corporate Governance Committee to become nominees for election to the Board at the ~~2015 annual meeting~~2017 Annual Meeting of ~~stockholders~~Stockholders must do so by delivering a written recommendation to the Nominating, Compliance and Corporate Governance Committee, c/o Masimo Corporation, ~~40 Parker,~~52 Discovery, Irvine, California 92618, ~~Attn:~~Attention: Corporate Secretary, no later than the close of business on ~~March 21, 2015,~~January 31, 2017, and no earlier than ~~February 19, 2015,~~January 1, 2017, unless the meeting date is more than 30 days before or after ~~June 5, 2015,~~April 20, 2017, in which case the written recommendation must be received by our Corporate Secretary no later than the close of business on the later of (i) the 90th day before the ~~2015 annual meeting~~2017 Annual Meeting of ~~stockholders~~Stockholders, or (ii) the 10th day following the day on which we first publicly announce the date of the ~~2015 annual meeting~~2017 Annual Meeting of ~~stockholders.~~Stockholders. Each written recommendation must set forth, among other information:

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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Director candidate nominations from stockholders ~~must be provided in writing and~~ must include the written consent of each proposed nominee to serve as director if so elected.

If a proposed director candidate is recommended by a ~~security holder~~stockholder in accordance with the procedural requirements discussed above, the Corporate Secretary will provide the foregoing information to the Nominating, Compliance and Corporate Governance Committee.

Evaluating Nominees for Director

Our Nominating, Compliance and Corporate Governance Committee will consider director candidates who are suggested by members of the committee, other members of our Board, members of management, advisors and our security holders who submit recommendations in accordance with the requirements set forth above. The Nominating, Compliance and Corporate Governance Committee may, in the future, also retain a third-party search firm to identify candidates on terms and conditions acceptable to the Nominating, Compliance and Corporate Governance Committee, but to date it has not paid a fee to any third party to assist in the process of identifying or evaluating director candidates. The Nominating, Compliance and Corporate Governance Committee will evaluate all nominees for director under the same approach whether they are recommended by security holders or other sources.

The Nominating, Compliance and Corporate Governance Committee will review candidates for director nominees in the context of the current composition of our Board and committees, the operating requirements of the Company and the long-term interests of our stockholders. In conducting this assessment, the Nominating, Compliance and Corporate Governance Committee may consider the director nominee’s qualifications, diversity, age, skills and such other factors as it deems appropriate given the current needs of the Board, the committees and Masimo, to maintain a balance of knowledge, experience, diversity and capability. In the case of incumbent directors whose terms of office are set to expire, the Nominating, Compliance and Corporate Governance Committee may review such directors’ overall service to the Board, the committees and Masimo

during their term, including the number of meetings attended, level of participation, quality of performance and any other relationships and transactions that might impair such directors’ independence. In the case of new director candidates, the Nominating, Compliance and Corporate Governance Committee will also determine whether the nominee must be independent for NASDAQ purposes, which determination will be based upon applicable NASDAQ listing standards and applicable SEC rules and regulations. Although we do not have a formal diversity policy, when considering diversity in evaluating director nominees, the Nominating, Compliance and Corporate Governance Committee will focus on whether the nominees can contribute varied perspectives, skills, experiences and expertise to the Board.

The Nominating, Compliance and Corporate Governance Committee will evaluate the proposed director’s candidacy, including proposed candidates recommended by security holders, and recommend whether the Board should nominate the proposed director candidate for election by our stockholders.

Stockholder Communications with the Board of Directors

Our Board has adopted a formal process by which security holders may communicate with the Board or any of its directors. Stockholders of Masimo wishing to communicate with our Board or an individual director may send a written communication to the Board or such director, c/o Masimo Corporation, ~~40 Parker,~~52 Discovery, Irvine, California 92618, ~~Attn: Corporate Secretary.~~Attention: Compliance Officer. Each communication must set forth:

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.

Each communication will be reviewed by Masimo’s ~~Corporate Secretary~~Compliance Officer to determine whether it is appropriate for presentation to the Board or the individual director. Examples of inappropriate communications include junk mail, spam, mass mailings, product complaints, product inquiries, new product suggestions, resumes, job inquiries, surveys, business solicitations and advertisements, as well as unduly hostile, threatening, illegal,

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unsuitable, frivolous, patently offensive or otherwise inappropriate material. These screening procedures have been approved by a majority of the independent members of our Board.

Communications determined by our ~~Corporate Secretary~~Compliance Officer to be appropriate for presentation to the Board or such director will be submitted to the Board or the individual director on a periodic basis. All communications directed to the Audit Committee in accordance with our Open Door Policy for Reporting Accounting, Audit, and Other Compliance Concerns (the “Open Door Policy”) that relate to ~~questionable~~ accounting topics, internal accounting controls or auditing matters involving the Company generally will be forwarded to a compliance officer designated by the Audit Committee to receive and review these communications and then promptly and directly forwarded by a compliance officer to the Audit Committee or the Board, as appropriate, in accordance with the terms of the Open Door Policy. All communications directed to the Nominating, Compliance and Corporate Governance Committee in accordance with our Open Door Policy that relate to non-financial matters (including without limitation purported or suspected violations of any law or regulation, our Code of Business Conduct and Ethics or other policies) will generally be forwarded to a ~~compliance officer~~Compliance Officer designated by the Nominating, Compliance and Corporate Governance Committee to receive and review these communications and then promptly and directly forwarded by a ~~compliance officer~~Compliance Officer to the Nominating, Compliance and Corporate Governance Committee or the Board, as appropriate, in accordance with the terms of the Open Door Policy.

Code of Business Conduct and Ethics

We have adopted the Masimo Corporation Code of Business Conduct and Ethics that applies to all of our employees, executive officers and directors. The Code of Business Conduct and Ethics is available to stockholders on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate Governance.” If we make any substantive amendments to our Code of Business Conduct and Ethics or grant any waiver from a provision of the Code of Business Conduct and Ethics to any executive officer or director, we will promptly disclose the nature of the amendment or waiver on our ~~Internet~~internet website at http://ir.masimo.com under “Corporate Governance” and/or in our public filings with the SEC.

Hedging and Pledging Policies

As part of our insider trading policy, our employees, executives and directors are prohibited from engaging in short sales of our securities and from engaging in hedging transactions involving our securities. Our insider trading policy ~~does not restrict~~restricts pledges of Masimo securities ~~but requires~~other than those that ~~pledges of securities be~~are pre-cleared by an insider trading compliance officer. As of March ~~14, 2014,~~7, 2016, 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. In addition to obtaining pre-clearance from an insider trading compliance officer, Mr. Kiani also sought the approval of the Compensation Committee prior to entry into such pledge. He stated that,

~~absent an~~ without the ability to pledge these shares, certain of his family’s financial planning objectives would need to be satisfied through the sale of shares of Masimo common stock held by the Kiani Family Remainder Trust ~~stock~~ and that he did not want to diminish his shareholdings. The Compensation Committee considered Mr. Kiani’s request and, as part of that consideration, noted that, as reported on page 4567 of this Proxy Statement, his beneficial stock ownership is ~~11.0%~~13.7%, so that, even without taking into account the pledged shares, his stock ownership is greatly in excess of the number of shares Mr. Kiani would be required to hold under Masimo’s stock ownership policy. The Compensation Committee also concluded that continued ownership of the pledged shares by the Kiani Family Remainder Trust further aligned ~~his~~Mr. Kiani’s interests with the long term interests of stockholders. In light of these facts, the Compensation Committee concluded that approving the pledge was consistent with stockholder interests.

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NON-EMPLOYEE DIRECTOR COMPENSATION

Prior Non-Employee Director Compensation Policy

~~We have adopted a~~Our prior non-employee director compensation ~~policy. Under this~~ policy (the “Prior Non-Employee Director Compensation Policy”) provided that our Audit Committee ~~chairperson receives~~Chairperson received an annual cash retainer of $40,000, payable on a quarterly basis in ~~arrears. Except~~arrears and that, except as otherwise provided by our Board or Compensation Committee, no other non-employee director iswas entitled to receive any cash compensation for his service on our Board or any committee thereof. ~~However,~~In addition, the Prior Non-Employee Director Compensation Policy provided that our non-employee directors ~~are~~were entitled to reimbursement for their reasonable expenses incurred in connection with attending meetings of our Board and committees thereof and performing their functions and duties as directors.

~~Our Board has adopted~~The Prior Non-Employee Director Compensation Policy provided for the following ~~policy~~ with respect to granting stock options to non-employee ~~directors. Our~~directors:

Upon first becoming a member of our Board, our Audit Committee ~~chairperson~~Chairperson received a stock option grant for 150,000 shares of common stock, which ~~vests~~vested at a rate of 20% per year on each anniversary of the grant date.

Upon first becoming a member of our Board, unless otherwise determined by our Compensation Committee, each non-employee director other than our Audit Committee ~~chairperson is~~Chairperson was eligible to receive an option to purchase 50,000 to 100,000 shares of our common stock, ~~that vests~~which vested at a rate of 20% per year on each anniversary of the grant date. Our Compensation Committee ~~will determine~~was responsible for determining the size of the initial award to be made.

Upon the vesting of 60% of the initial option award made to each of our ~~Audit Committee chairperson and other outside~~non-employee directors, ~~our Audit Committee chairperson or other outside directors, as applicable, are~~such non-employee director was eligible to receive an additional option grant to purchase 20,000 shares that ~~vest~~vested at a rate of 20% per year on each anniversary of the grant date. All awards made to our non-employee directors ~~in the future will be approved by our Compensation Committee and~~were made under our 2007 Plan or a ~~successor~~predecessor plan. ~~Our~~

Except as described below with respect to the compensation payable to Mr. Harkin after joining our Board in December 2015, our Audit Committee ~~chairperson~~Chairperson was the only non-employee director who ~~received~~was entitled to receive cash compensation for his Board and committee service in fiscal ~~2013.~~2015. The ~~non-employee director compensation policy does~~Prior Non-Employee Director Compensation Policy was not ~~represent~~ a contractual commitment enforceable by any director and it ~~may~~could be modified by the Board in its discretion at any time.

New Non-Employee Director Compensation Policy

On February 11, 2016, after our Compensation Committee consulted with its independent compensation advisor, FW Cook, on market practices for other representative companies, our Board adopted a new non-employee director compensation policy (the “New Non-Employee Director Compensation Policy”). Under the New Non-Employee Director Compensation Policy, each non-employee director receives an annual cash retainer of $50,000 for his or her Board service and an annual cash retainer of $7,500 for each committee of the Board on which he or she serves. Our Audit Committee Chairperson receives an additional annual cash retainer of $15,000, our Compensation Committee Chairperson receives an additional annual cash retainer of $10,000, and our Nominating, Compliance and Corporate Governance Committee Chairperson receives an additional annual cash retainer of $7,500. In addition, each director receives a $1,000 per meeting cash fee for each committee meeting he or she attends in excess of the first eight meetings of each committee during the fiscal year. All cash retainers are payable on a quarterly basis in arrears. Each year on the date of our annual meeting of stockholders, each non-employee director will be also granted an award of restricted share units (“RSUs”) with respect to shares of our common stock having a grant date fair value of $140,000, 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. The New Non-Employee Director Compensation Policy also provides that all RSUs granted to the non-employee directors pursuant to the policy will vest in full in the event of a change in control of Masimo. As part of the transition to the New Non-Employee Director Compensation Policy, neither Mr. Reynolds nor Mr. Harkin will be eligible to receive any grants

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on the date of our 2016 Annual Meeting of Stockholders; and they will receive their first equity grants under this policy on the date of our 2017 Annual Meeting of Stockholders.

Mr. Harkin was appointed to our Board on December 16, 2015, during the transition from the Prior Non-Employee Director Compensation Policy to the New Non-Employee Director Compensation Policy. In connection with his appointment to our Board, Mr. Harkin was granted restricted stock units with respect to 3,385 shares of our common stock, which had a grant date fair value of $139,970 and will vest on the one-year anniversary of the date of grant, subject to Mr. Harkin’s continued service with Masimo through the vesting date. From December 16, 2015 through February 11, 2016, Mr. Harkin was entitled to receive cash compensation at a rate of $50,000 per year for his service on our Board and $7,500 per year for his service on each Board committee.

The following table sets forth summary information concerning compensation paid or accrued for services rendered to us in all capacities to the members of our Board for the fiscal year ended ~~December 28, 2013.~~

January 2, 2016.


Name⁽³⁾⁽¹⁾	Fees Earned or Paid in Cash			Option Awards⁽⁴⁾		All Other Compensation		Total		Fees Earned or Paid in Cash			Stock Awards⁽²⁾⁽³⁾			Option Awards⁽³⁾⁽⁴⁾			All Other Compensation		Total
Steven J. Barker, Ph.D., M.D.	$	60,000	⁽⁵⁾	$	154,674	$	—	$	214,674	$	120,000	⁽⁵⁾	$	—		$	297,974	⁽⁶⁾	$	—	$	417,974
Edward L. Cahill	—			154,674		—		154,674
Robert Coleman, Ph.D.	—			154,674		—		154,674
Robert Coleman, Ph.D.⁽⁷⁾										—			—			294,861		⁽⁸⁾	—		294,861
Sanford Fitch	40,000		⁽⁶⁾	154,674		—		194,674		40,000		⁽⁹⁾	—			595,948		⁽¹⁰⁾	—		635,948
Jack Lasersohn	—			154,674		—		154,674
Thomas Harkin⁽¹¹⁾										3,575		⁽¹²⁾	139,970		⁽¹³⁾	—			—		143,545
Jack Lasersohn⁽¹⁴⁾										—			—			297,974		⁽⁶⁾	—		297,974
Craig Reynolds										—			—			—			—		—

~~__________________~~ ___________


⁽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” ~~above.~~on page 46 of this Proxy Statement.


⁽²⁾	As of ~~December 28, 2013, each~~January 2, 2016, Thomas Harkin held 3,385 RSUs and none of our other non-employee directors held ~~the following number of options: Steven J. Barker, Ph.D., M.D.—210,000; Edward L. Cahill—100,000; Robert Coleman, Ph.D.—160,000; Sanford Fitch—135,000; and Jack Lasersohn—130,000.~~any RSUs.


⁽³⁾	~~Mr. Reynolds was appointed to our Board effective April 3, 2014 and was not a member of our Board as of December 28, 2013 and is therefore not included in this table.~~

⁽⁴⁾

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 ~~2013,~~2015, computed in accordance with authoritative accounting guidance. These amounts do not represent the actual amounts paid to or realized by the directors during fiscal ~~2013.~~2015. 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. ~~For a detailed description~~The value as of the ~~assumptions used for purposes of determining~~ grant date ~~fair value, see Note 12 to~~for the ~~Financial Statements~~RSUs is calculated based on the number of restricted share units at the grant date market price and ~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting~~is recognized once the requisite service period for the restricted share unit is satisfied.

For a detailed description of the assumptions used for purposes of determining grant date fair value, see Note 14 to the Financial Statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates-Share-Based ~~Compensation,”~~Compensation”, included in our Annual Report on Form 10-K for the year ended ~~December 28, 2013~~January 2, 2016 filed with the SEC on February ~~14, 2014.~~24, 2016.


⁽⁴⁾	As of January 2, 2016, each of our non-employee directors held the following number of options: Steven J. Barker, Ph.D., M.D.—140,000; Sanford Fitch—145,000; Jack Lasersohn—170,000; Craig Reynolds—100,000 and Thomas Harkin—0.


⁽⁵⁾	Consists of fees earned by Dr. Barker for non-employee consulting services ~~as our acting Chief Medical Officer.~~provided to the Company.


⁽⁶⁾	Consists of the grant of an option on December 17, 2015 to purchase 20,000 shares of common stock under the Prior Non-Employee Director Compensation Policy with a grant date fair value of $297,974.


⁽⁷⁾	Dr. Coleman’s service on the Board and related committees ended when his term expired at our 2015 Annual Meeting of Stockholders held on June 2, 2015.

⁽⁸⁾

Consistent with Dr. Coleman’s ceasing to serve as a Board Member, all future vesting of Dr. Coleman’s existing stock options terminated. However, the Board extended the exercise date for Dr. Coleman’s vested options by two years to June 2, 2017. This extension of the exercise period was considered a stock option modification under accounting principles generally accepted in the United States (“GAAP”), and accordingly, the Company recorded the incremental fair value of these options resulting from such modification (in excess of the original grant date fair value) of $294,861 as additional stock option expense in the second quarter of fiscal 2015.

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⁽⁹⁾	Consists of an annual retainer paid to our Audit Committee ~~chairperson~~Chairperson pursuant to our ~~non-employee director compensation policy.~~Prior Non-Employee Director Compensation Policy.

~~Information Regarding Executive Officers~~

~~Our executive officers and their respective positions are as follows:~~



~~Name~~	~~Age~~⁽¹⁾	~~Position(s)~~
~~Joe Kiani~~	49	~~Chief Executive Officer & Chairman of the Board of Directors~~
~~Mark P. de Raad~~	54	~~Executive Vice President, Chief Financial Officer & Corporate Secretary~~
~~Jon Coleman~~	50	~~President, Worldwide Sales, Marketing and Clinical Research~~
~~Rick Fishel~~	56	~~President, Worldwide OEM Business & Corporate Development~~
~~Paul Jansen~~	43	~~Executive Vice President, Marketing~~
~~Yongsam Lee~~	49	~~Chief Information Officer and Executive Vice President, Operations & Regulatory Affairs~~
~~Tom McClenahan~~	41	~~Executive Vice President and General Counsel~~
~~Anand Sampath~~	47	~~Executive Vice President, Engineering~~

~~___________~~

^(1)(10)

AsConsists of ~~March 14, 2014.~~the grant of an option on December 17, 2015 to purchase 20,000 shares of common stock under the Prior Non-Employee Director Compensation Policy with a grant date fair value of $297,974, as well as a discretionary grant of an option on December 17, 2015 to purchase an additional 20,000 shares of common stock, with a combined grant date fair value of $595,948. The additional option was granted because the Compensation Committee became aware that Mr. Fitch was entitled to receive a grant of options to purchase 20,000 shares of common stock in February 2011 but was inadvertently omitted from the list of non-employee directors who received grants of options in February 2011.


⁽¹¹⁾	Mr. Harkin was appointed to our Board effective December 16, 2015.


⁽¹²⁾	Consists of prorated amounts of the annual retainers earned by Mr. Harkin as a director and member of the Audit, Compensation and Nominating, Compliance and Corporate Governance Committees during fiscal 2015.


⁽¹³⁾	In connection Mr. Harkin’s appointment to our Board, he received a grant of 3,385 RSUs on December 16, 2015 with a grant date fair value of $139,970.


⁽¹⁴⁾	Mr. Lasersohn’s service on the Board will cease when his current term expires at the Annual Meeting.

~~Mark P. de Raad~~ has served as our Executive Vice President and Chief Financial Officer since June 2006 and as our Corporate Secretary since December 2009. From November 2002 through May 2006, Mr. de Raad served as Vice President, Chief Financial Officer and Secretary for Avamar Technologies, Inc., a start-up enterprise software development company. He served as Chief Financial Officer, Quantum Storage Solutions Group, a division of Quantum Corporation from June 2001 through November 2002. From September 1997 through June 2001, Mr. de Raad was Vice President, Finance and Chief Financial Officer for ATL Products, Inc., a manufacturer of automated tape libraries. Mr. de Raad is a Certified Public Accountant (inactive) and holds a B.S. in Accounting from the University of Santa Clara.

~~Jon Coleman~~ has served as our President, Worldwide Sales, Marketing and Clinical Research 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., most recently 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.

~~Rick Fishel~~ has served as President, Worldwide OEM Business and Corporate Development since February 2011. From February 2009 to February 2011, he was our President, Americas and Worldwide OEM Business, and was President of Masimo Americas from June 2004 to February 2009. From January 2003 to June 2004, Mr. Fishel was Regional Vice President of Sales for the Information Solutions segment of the McKesson Corporation, a provider of supply, information and care management products and services. From January 2001 to January 2003, he served as National Vice President of Sales for the Consulting Services division of GE Medical Systems, Inc., a provider of medical technology and productivity solutions. Mr. Fishel holds a B.S. in Marketing from Arizona State University.

~~Paul Jansen~~ has served as our Executive Vice President, Marketing since April 2008, and was our Vice President of Marketing from January 2008 to April 2008. From August 1997 through December 2007, he held progressive positions with CardioDynamics, a cardiac monitoring and diagnostic company, last serving as Vice President, Marketing & Clinical Development. Mr. Jansen holds a B.S. in Planning from Iowa State University and an M.B.A. from Arizona State University.

~~Yongsam Lee~~ has served as our Chief Information Officer and Executive Vice President, Operations & Regulatory Affairs since March 2013. From March 1996 to October 2001 and from April 2002 to March 2013, 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.

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~~Tom McClenahan~~ has served as our Executive Vice President and General Counsel since April 2013. 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 attorney with the law firm of Fish & Richardson. From September 1999 to November 2002, he was an attorney 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~~ has served as our Executive Vice President, Engineering since March 2007. He is an inventor on more than four patents relating to patient monitoring, wireless networks and communications. 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 holds a B.S. in Engineering from Bangalore University.EXECUTIVE COMPENSATION

~~COMPENSATION OF EXECUTIVE OFFICERS~~

Compensation Discussion and Analysis

The following compensation discussion and analysis contains statements regarding future individual and Company performance targets and goals. These targets and goals are disclosed in the limited context of Masimo’s compensation programs and should not be understood to be statements of management’s expectations or estimates of results or other guidance. Masimo specifically cautions investors not to apply these statements to other contexts.

~~As required by SEC rules, this~~This Compensation Discussion and Analysis ~~discusses~~provides a description of our executive compensation philosophy and programs, the compensation decisions ~~with respect to~~the Compensation Committee has made under those programs and the factors considered in making those decisions. This Compensation Discussion and Analysis focuses on the compensation of the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), and the three most highly paid executive officers ~~for 2013~~ other than the ~~Chief Executive Officer~~CEO and the ~~Chief Financial Officer.~~CFO. These executive officers ~~will be referred to herein as the~~are our “named executive officers” or “NEOs”.” For ~~2013,~~fiscal 2015, the NEOs were ~~the following:~~as follows:



Name		Position(s)
Joe Kiani		Chief Executive Officer & Chairman of the Board ~~of Directors~~
Mark P. de Raad		Executive Vice President, Finance & Chief Financial Officer ~~& Corporate Secretary~~
~~Jon Coleman~~Anand Sampath		~~President, Worldwide Sales, Marketing and Clinical Research~~Chief Operating Officer
Rick Fishel		President, Worldwide OEM Business & ~~Corporate~~Strategic Development
~~Yongsam Lee~~Jon Coleman		~~Chief Information Officer and Executive Vice~~ President, ~~Operations~~Worldwide Sales, Professional Services & ~~Regulatory~~Medical Affairs

~~EXECUTIVE SUMMARY~~Executive Summary

The primary objective of our executive compensation program is to attract and retain a talented, entrepreneurial, and creative team of executives who will provide leadership for our success in driving Masimo’s technologies and products to the broadest number of patients, and in turn, sustainable long-term value. We seek to accomplish this goal in a way that is aligned with the long-term interests of our stockholders. Our Compensation Committee oversees our executive compensation program and determines the compensation for our executive officers, including the NEOs. We believe that our executive compensation program effectively aligns the interests of our executive officers with our objective of creating sustainable long-term value.

Financial Performance

Fiscal 2015 was a year of strong financial performance for Masimo. Financial highlights included:

Masimo’s closing stock price of $41.51 on the last trading day of fiscal 2015 represented a 60.4% increase from the closing stock price of $25.88 on the last trading day of fiscal 2014.


•	Fiscal 2015 product revenues significantly exceeded the guidance we issued at the beginning of the year and increased by 7.6% to $599.3 million, or 11.0% to $618.0 million on a constant currency basis¹, as compared to product revenues of $556.8 million in fiscal 2014.


•	Total fiscal 2015 revenues, including royalties, increased to $630.1 million, up 7.4% from $586.6 million in fiscal 2014. On a constant currency basis², total fiscal 2015 revenues, including royalties, increased to $648.8 million, up 10.6% compared to fiscal 2014.


•	Masimo rainbow^® product revenues increased to $61.8 million, up 19.5% from fiscal 2014.


•	Masimo SET^® and rainbow SET^™ shipments totaled 182,600 units, up from 171,600 in the prior year, setting a new Masimo record.

¹ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

~~Company Performance~~². Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

~~For the~~

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•	Masimo’s fiscal 2015 GAAP earnings per share was $1.55, up 19.2% from $1.30 in 2014. On a constant currency basis³, Masimo’s 2015 adjusted earnings per share would have been $1.69, up 30.0% from fiscal 2014.

Masimo executed and delivered on a key fiscal year ended December 28, 2013, Masimo product revenue rose 11% to $517.4 million from $464.9 million in fiscal 2012. Total revenues, which include royalties, rose 11% to $547.2 million from $493.2 million during the same periods. In fiscal 2013, net income declined from $62.3 million in fiscal 2012 to $58.4 million, and earnings per diluted share decreased from $1.07 to $1.02. Included in the fiscal 2013 financial results were fourth quarter fiscal 2013 charges2015 internal metric of approximately $8.0 million, or $0.09 per share, for a litigation award and related defense costs, and approximately $4.6 million, or $0.06 per share, for certain write-downs of inventory and equipment resulting from accelerated technology transitions. Excluding these charges,delivering earnings per share ~~would have been $1.17. In addition, throughout the year, the Company was negatively impacted~~growth of at least two times product revenue growth. As noted above, GAAP earnings per share grew by ~~net currency losses due primarily to the strengthening of the U.S. Dollar against the Japanese Yen. Notably, changes in foreign currency rates reduced 2013 earnings~~19.2% as compared to GAAP product revenue growth of 7.6%, representing GAAP earnings per share growth of 2.5 times GAAP product revenue growth.

Product revenues have consistently grown in the last five years, rising from $406.4 million in 2011 to $599.3 million in 2015, a compound annual growth rate of 8.8%.

GAAP Earnings Per Share have accelerated in the last two fiscal ~~2012 by approximately $0.15 per diluted share.~~years as part of the Company’s focus on financial leverage.

~~During~~

³ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

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Several widely accepted measures of operating performance reflect the strength of Masimo’s 2015 financial performance on both an absolute and relative basis versus other representative companies comprised of publicly-traded companies classified as health care equipment and supplies companies in the Global Industry Classification Standard Code, the same classification as Masimo (see “— The Compensation Setting Process” on page 31 of this Proxy Statement for a discussion of the other representative companies). Such operating performance measures based on the four fiscal ~~2013, total stockholder return,~~quarters ended nearest to September 30, 2015, were as ~~measured as the increase in our stock price~~follows:



Measures of Operating Performance	Masimo	Percentile Ranking Versus Other Representative Companies
Earnings Per Share Growth	40.5%	100^th
Return on Equity	23.0%	100^th
Return on Capital	17.3%	89^th
Return on Assets	13.4%	87^th
Revenue Growth	11.1%	74^th
Operating Margin	18.4%	68^th

For fiscal 2015, cash generated from business operations was $114.2 million. Also during fiscal ~~2013, was 40.2%~~2015, the Company repurchased approximately 4.1 million shares totaling approximately $155.0 million (and 8.6 million shares totaling approximately $257.4 million over the past two years), ~~which we believe was~~returning approximately 135.7% of the ~~result of consistently stronger operating performance throughout~~cash generated from business operations to its stockholders during fiscal 2015. Over the ~~year. In addition,~~last five years, the ~~Company’s Return on Equity, as measured by net income divided by average stockholders’ equity, was 19.5% for fiscal 2013. From 2009 to 2013, through dividends and stock repurchases, we have~~Company has returned approximately ~~95%~~106.2% of cash generated from business operations to ~~stockholders.~~its stockholders through a combination of dividends and stock repurchases.

~~2013~~Results of Stockholder Advisory Vote on Executive Compensation

Over the past three years, we received disappointing levels of support on our stockholder advisory vote on executive compensation. Based on discussions with many of our stockholders after these votes, we believe the low levels of support were primarily the result of concerns regarding our CEO’s prior employment agreement. During this time period, our Compensation Committee, together with independent legal, tax, executive compensation and ~~Pay~~other financial advisors, considered a variety of alternative employment agreement arrangements for ~~Performance~~our CEO. However, despite considerable efforts by our CEO and our Compensation Committee, no mutually agreeable solution had been identified by the time of last year’s proxy statement preparation. As a result, in last year’s proxy statement, we noted the Compensation Committee’s continued focus on this matter and its on-going effort to attempt to find a mutually agreeable solution.

After continued efforts by our CEO and Compensation Committee, including advice to the Compensation Committee from two nationally recognized law firms, as well as the Compensation Committee’s compensation consultant, F.W. Cook & Co., Inc. (“FW Cook”), we reached an agreement on a new CEO employment agreement (the “Restated CEO Employment Agreement”) on November 4, 2015. These discussions were very complex since the cost of any new employment agreement to Masimo depended on a variety of factors including (1) the potential future stock price; (2) when, if ever, there would be a change in control or a termination of the CEO without cause or by the CEO for Good Reason; and (3) the degree to which the provisions in the employment agreement would continue to apply to the stock option awards that the CEO received prior to any termination of his employment. At the conclusion of these negotiations, the Compensation Committee (comprising all of the members of the Board who were independent under the relevant SEC and NASDAQ requirements) unanimously concluded that the Restated CEO Employment Agreement represented a significant improvement from a stockholder perspective over the then-current agreement and that a more favorable modification to the employment agreement could not be obtained.

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The details of the Restated CEO Employment Agreement and the changes from the prior employment agreement are outlined in “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement. The Restated CEO Employment Agreement eliminated many of the provisions of the prior employment agreement that stockholders had considered objectionable thereby significantly reducing the potential cost to Masimo (as noted on page 54 of this Proxy Statement, if a change in control had occurred December 31, 2015, the cost differential between the new employment agreement would have been approximately $52 million). Specifically, the Restated CEO Employment Agreement has eliminated certain provisions of Mr. Kiani’s previous employment agreement, including:

single trigger payments upon a change of control;

Mr. Kiani’s receipt of full value shares in lieu of his stock options upon a qualifying event;

payment of federal and state withholding taxes on such full value shares;

tax gross-up payments in the event that payments were subject to change-in-control excise taxes;

certain provisions in the contract providing for ~~2013 as~~survival of these protections subsequent to contract expiration; and

Mr. Kiani’s guaranteed annual option grant of 300,000 shares after fiscal 2017.

In consideration for these changes, Mr. Kiani became contingently entitled to receive up to 2.7 million shares of Masimo stock and $35 million in cash, which shares and amounts (1) are only issuable and payable if a Qualifying Termination actually occurs, and (2) will be phased out at the rate of 10% a year beginning in 2018.

It is important to note that, although SEC rules require the value of the RSUs to be reported in the Summary Compensation Table ~~is significantly higher than 2012 levels,~~for 2015 (see “Summary Compensation Table” on page 46 of this ~~is primarily due~~Proxy Statement), the RSUs will only vest and result in realizable value to Mr. Kiani in the event of a Qualifying Termination and will not vest solely in connection with his continued service to Masimo. Accordingly, to assist stockholders in comparing the total compensation provided to Mr. Kiani without taking into account the contingent value of the RSUs, we have added a column to the ~~resumption~~Summary Compensation Table that shows Mr. Kiani’s 2015 compensation without reference to the value of ~~annual equity grants.~~the RSUs. We believe that this provides a more accurate comparison to the compensation paid to Mr. Kiani in 2013 and 2014, since the values in the Summary Compensation Table for those years do not include any value relating to this contingent compensation resulting from the Restated CEO Employment Agreement which is only realizable by Mr. Kiani in the event of a Qualifying Termination. In ~~fiscal 2011,~~addition, it is important to note that the total compensation amount reported for these 2.7 million RSUs in the Summary Compensation Table is calculated based upon the closing stock price of our common stock on the date of the grant. However, since (i) the shares subject to this RSU will only vest in certain limited circumstances (and may never vest); (ii) the number of shares issuable may decrease with time; and (iii) the value of the shares may fluctuate over time based upon our stock price, the actual value that Mr. Kiani may ultimately realize from these RSUs may differ significantly from the accounting value of the award reflected in the Summary Compensation Table.

Immediately after we entered into the Restated CEO Employment Agreement, we reached out to 22 of our largest stockholders, who collectively represented approximately 53% of our outstanding shares of common stock. Over the following month, Mr. Reynolds, the Chairperson of our Compensation Committee, and other Compensation Committee members held calls with all of such stockholders who expressed an interest in speaking with the Compensation Committee. During these calls, which were led by Mr. Reynolds, the Compensation Committee articulated the benefits of the ~~Board~~Restated CEO Employment Agreement to stockholders. The response from these stockholders was very positive, with many stockholders acknowledging that, while the process had taken much longer than many anticipated, the Restated CEO Employment Agreement had successfully removed many of ~~Directors (the “Compensation Committee”) determined that due primarily to retention~~the elements they had previously considered problematic and ~~motivation considerations, it would accelerate the fiscal 2012 stock option grant into October 2011. Accordingly, no stock option grants were made to NEOs~~was in ~~2012. Overall, 2013 NEO compensation was 9% lower than the average compensation for 2011 and 2012.~~fact much more stockholder friendly.

Other Executive Compensation Actions

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~~Another factor that increased 2013 compensation over 2012 compensation was improved performance under~~In addition to finalizing the ~~annual executive bonus plan. Based on the Company's improved 2013 financial and operating performance against the goals established~~Restated CEO Employment Agreement, other key actions taken by the Compensation Committee with respect to Masimo’s 2015 executive compensation program included the following:

During fiscal 2015, certain base salary adjustments were made for the NEOs other than the CEO, in amounts ranging from 3.0% to 21.7%. See “NEO Base Compensation Below” for further details.

As a result of the Company’s strong fiscal 2015 financial performance, the Compensation Committee ~~approved a 100%~~established the fiscal 2015 Company Factor ~~for~~under the ~~CEO~~Executive Annual Cash Bonus Plan (“Executive Annual Plan”) at 105%.

As a result of both Company and ~~an 85% Company Factor for the other NEOs for purposes of the fiscal 2013 annual executive bonus plan, as compared to a 73% Company Factor for the CEO and other NEOs in fiscal 2012.~~

~~Base compensation levels for our NEOs have remained unchanged since July 2012. In fiscal 2013, as part of~~individual contributions made by the Company’s ~~efforts to offset the negative financial impact of the medical device tax that become effective in 2013 (the “Medical Device Tax”), without resorting to layoffs,~~NEOs, the Compensation Committee established fiscal 2015 Individual Factors for the NEOs under the Executive Annual Cash Bonus Plan ranging from 100% to 105%.

Performance Orientation of Executive Compensation

We believe that our executive compensation program is closely aligned with our stockholders’ interests. While base salary and ~~management determined not~~an annual cash based bonus opportunity represent the achievement of shorter-term goals, our multi-year cash based bonus plan (three-year performance periods), as well as our equity awards in the form of options to ~~grant any merit increases~~purchase shares of our common stock (typically five year vesting periods), provide for a longer-term compensation structure to ~~employees, including~~promote retention and focus attention on the ~~NEOs. In fact, as part of this attempt to offset the cost~~long-term operating results of the ~~Medical Device Tax,~~Company. Most of the annual compensation of our ~~CEO also requested,~~executive officers is directly tied, through performance-based bonuses or stock options, to driving financial and ~~the Compensation Committee agreed, to temporarily reduce his base salary by 5%.~~operating results that increase stockholder value.

~~The Board and Compensation Committee believe that executive~~Executive pay opportunities ~~and in particular the CEO’s pay, should~~at Masimo continue to be tightly linked with Company financial performance. ~~This perspective is illustrated by the~~The following chart ~~which~~ shows the ~~percentages~~distribution of ~~the CEO’s~~each NEO’s target total ~~target direct~~ compensation ~~(base~~for fiscal 2015, consisting of base salary, target annual cash bonus, target multi-year cash bonus, and ~~long-term incentive~~ grant values) that are at risk and performance-based. We believe that stock options, which only provide compensation with stock price growth, provide great incentive for our executives to create long term value and increase stock price performance, thereby aligning their interests with those of our stockholders. As shown in the following table, over 82% of the CEO’s aggregate target total direct compensation from 2011 through 2013 was at risk and based on our financial and stock price performance.

The linkage of pay and performance can also be seen by contrasting the CEO’s reported compensation for 2011 through 2013 with his realizable compensation. Since there is realizable value from stock options only when and to the extent our stock price appreciates, and given our emphasis on stock options as our equity-based incentive, the realizable compensation for our CEO for the period from 2011 through 2013 has generally been lower than the total compensation reported in the 2013 Summary Compensation Table for this period. The Summary Compensation Table reports thedate fair value of options based on a Black-Scholes calculation determined as of the grant date. We believe, however, that the intrinsic value of the options, calculated as the positive difference, if any, between fair market value of our common stock as of the end of the period and the option exercise price for optionsequity awards granted during the ~~period, is a better measure of the compensation that is realizable.~~fiscal year:

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Annual CEO Compensation (2011-2013)
Fiscal Year
Compensation
As Reported
in 2013 Proxy

Realizable
Annual
    Value⁽¹⁾

Realizable Value
as a Percentage of
   Proxy-Reported Value
2013 $ 3,984,461
$ 3,731,351
94 %
2012 $ 1,298,641
$ 1,298,641
100 %
2011 $ 7,226,647
$ 3,860,467
53 %
3-Year Avg. $ 4,169,916
$ 2,963,486
71 %

~~______________________~~ ___________


⁽¹⁾	~~Option value~~The Multi-Year Bonus percentage for each NEO is based on ~~intrinsic value, determined by the difference between Masimo’s December 27, 2013 closing stock price of $28.86 and the exercise price~~1/3 of the ~~options~~target value for the three year performance period covering 2014 through 2016.

⁽²⁾

The Equity Awards percentage for Mr. Kiani does not include the RSU award granted ~~during~~to Mr. Kiani in November 2015 in connection with the ~~period. Our 2013 fiscal~~amendment and restatement of his employment agreement because 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. In addition, 270,000 shares subject to the RSUs will terminate without the payment of any consideration to Mr. Kiani, to the extent then unvested on January 1 of each year, ~~ended~~beginning on ~~December 28, 2013. The stock options granted in 2011~~January 1, 2018. See “— Employment Contract and ~~2013 had exercise prices ranging from $20.19 to $30.06. No stock options were granted in 2012.~~Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement for additional information regarding the RSU award.

Recent Governance Practice Changes:

~~Addressing Stockholder Concerns. Our 2013 advisory say-on-pay proposal received~~Over the ~~approval of approximately 48.2% of the votes cast at the 2013 annual meeting of stockholders. Our Compensation Committee and the Board continue to be concerned with respect~~last year, in addition to the ~~low vote totals in favor of our say-on-pay proposal.~~

Prior to the 2013 annual meeting of stockholders, numerous discussions were held with the Company’s stockholders in order to understand stockholder views with respect to the Company’s executive compensation programs. Representatives of both management and the Board were involved in these discussions, which collectively involved over 15 stockholders representing more than 50% of the outstanding shares. One factor that emerged from those discussions was a concern regarding the second stock option grant madesignificant modifications to our executive officers in 2011. Notwithstanding the retention and other considerations behind the Compensation Committee’s decision to award executives a second option grant beyond the floor amounts of grants that had previously been made in 2011 in accordance with the Equity Award Compensation Policy (see “—CEO and Executive Officer Equity Award Compensation Policy” below), and despite no stock option grants having been made in 2012, it is clear that this decision was viewed unfavorably by a number of our investors. The Compensation Committee understands these concerns and will factor these concerns into any future equity award decisions; however at the same time, believes that there may be unusual circumstances that could warrant granting more than one equity award to an executive officer in any particular year.

~~Another concern expressed by some stockholders centered on the termination and change in control provisions in the CEO's~~CEO’s employment agreement, which they considered favorable to the CEO. As part of the discussions that were held with many of our largest stockholders, selected Board members provided some additional background on the reasons for these provisions in the employment agreement. These reasons included the fact that, at the time that Mr. Kiani, as founder of the Company possessed an extremely unique set of skills, including both keen technical industry knowledge and market sense, and given his personal financial status, considered it critical to sufficiently incentivize him to remain with the Company he had founded rather than consider other compelling opportunities available to him. All of the terms and conditions of Mr. Kiani's employment agreement, which included the provisions of his change in control agreement, where disclosed by the Company in its Form S-1 registration statement filed in connection with the Company's initial public offering in August 2007. Finally, it was also noted in the stockholder discussions that while our CEO and Board have been working in good faith to find alternatives that maintain the original intentions of the employment agreement and also address stockholder concerns, the Board cannot unilaterally modify any of the current change in control provisions as these features are part of the CEO's existing employment agreement.

~~While~~ the Board and Compensation Committee ~~believe that many of the considerations that led to the structure of the original employment agreement are relevant today, based on the concerns that~~ have been expressed by stockholders, the Compensation Committee engaged FW Cook as its executive compensation consultant, to review the current CEO termination and change in control provisions as well as examine potential alternatives to these features. During fiscal 2013, together with FW Cook and multiple outside legal firms, the Compensation Committee and its advisors have spent hundreds of hours reviewing this very complex agreement and equally complex potential solutions. In fact, toward the end of 2013, the Compensation Committee believed that it was close to having a potential solution; however, it was ultimately determined that various additional considerations made such solution unviable. Therefore, no solution has been identified so far that is considered acceptable from a cost standpoint. This continues to be a very difficult and complex topic to address.

Despite the complexity, both the Compensation Committee, the remaining independent directors and the CEO are committed to continuing to work with their advisors with the goal of trying to develop revised termination and change in control provisions that can be incorporated into the CEO's employment agreement.

~~Over the last several years, the Compensation Committee has~~ taken several ~~additional~~other actions ~~with respect to executive compensation~~ that it believes are responsive to stockholder concerns, including:

the termination of our prior stockholder rights plan (poison pill);

the adoption of a stock ownership policy with respect to our non-employee directors, which requires that our non-employee directors hold shares of Masimo stock with a value equal to at least $250,000 (See “— Non-Employee Director Stock Ownership Policy” on page 21 of this Proxy Statement for additional details);

the adoption of a new Non-Employee Director Compensation Policy (See “— Non-Employee Director Compensation” on page 21 of this Proxy Statement for additional details); and

the implementation of a 15 year term limit on non-employee director service.

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Governance Practice Changes Prior to 2015:

Prior to fiscal 2015, the Compensation Committee took the following actions that it also believed were responsive to stockholder concerns:

the adoption of an executive officer stock ownership policy, which requires that our CEO hold shares of Masimo stock with a value equal to at least six times his base salary and each of our other executive officers hold shares of Masimo stock with a value equal to at least one time his base salary (See “— Executive Officer Stock Ownership Policy” on page 42 of this Proxy Statement for additional details);

the adoption of a policy governing gross-up provisions in ~~line~~agreements and arrangements with ~~best practices~~our executive officers, pursuant to which the Compensation Committee will no longer approve any arrangements with any of our executive officers that include a tax “gross-up” provision requiring that payments in connection with a change in control be made in an amount that results in the Company paying employee taxes on such payments (See “— Gross-up Policy” on page 43 of this Proxy Statement for additional details);

the adoption of a clawback policy that provides, in the case of a financial restatement, for the recovery of executive compensation ~~including:~~that was due to the erroneous prior financial statement (See “Compensation Recovery” on page 41 of this Proxy Statement for additional details); and


1.	We adopted a stock ownership policy, which requires that our CEO hold shares of Masimo stock with a value equal to at least six times his base salary and each of our other executive officers hold shares of Masimo stock with a value equal to at least one time his base salary;

We adopted a policy governing gross-up provisions in agreements and arrangements with our executive officers, pursuant to which the Compensation Committee will not approve arrangements with any of our executive officers that includes a tax “gross-up” provision requiring that payments in connection with a change in control be made in the full amount, free of any deductions or withholdings, excluding Mr. Kiani’s employment agreement and any amendment thereof;


3.	~~We adopted a clawback policy that provides, in the case of a financial restatement, for the recovery of executive compensation that was due to the erroneous prior financial statement; and~~


4.	~~We prohibit directors and employees from engaging in hedging and similar transactions with respect to Company stock.~~

the adoption of a policy prohibiting employees, executives and directors from engaging in hedging and similar transactions with respect to Company stock (See “Corporate Governance and Board Matters — Hedging and Pledging Policies” on page 20 of this Proxy Statement for additional details).

~~1. Overview—~~Compensation Philosophy and Objectives

Our compensation program is intended to reward the management team and other employees for strong performance over the long-term, with consideration to near-term actions and results that strengthen and protect Masimo. We consider the potential risks in our business when designing and administering our pay program, and we believe our balanced approach to performance measurement and pay delivery works to avoid misaligned incentives for individuals to undertake excessive or inappropriate risk.

The Compensation Committee believes that Masimo operates within a very complex business environment and model, which requires a very ~~competent~~strong management team. The Compensation Committee also recognizes that it is critical to attract, develop and retain a senior management team capable of not only managing but also excelling within this complex and competitive business environment. As a result, the intent of the Compensation Committee for the Company’s executive compensation program is to provide compensation that:

appropriately aligns business objectives and stockholder interests;

attracts and retains the best executive talent;

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 executive officers to achieve the Company’s 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 the Company’s business environment and long-range business plans;

recognizes individual value and contributions to the Company’s success;

considers but does not exclusively rely upon market benchmarks; and

supports the Company’s succession planning objectives.

The Compensation Committee seeks to accomplish these goals in a way that is consistent with the long-term interests of the Company, its stockholders and employees. In making decisions about executive compensation, the Compensation Committee relies primarily on its general experience and subjective considerations of various factors, including individual and corporate performance, the Company’s strategic business goals and compensation

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survey data. The Compensation Committee does not set specific benchmarks for overall compensation or for allocations between different types of compensation. The Compensation Committee oversees the compensation program for the Company’s executive officers with input from independent executive compensation consultants and legal counsel, as well as the assistance of executive management as the Compensation Committee believes appropriate.

Masimo’s business model requires management to be adept at developing competitive products and sales/marketing strategies to support multiple customers, including hospitals, alternate care facilities and ~~Original Equipment Manufacturers (OEMs)~~original equipment manufacturers (“OEMs”). Many of Masimo’s competitors have substantially greater capital resources, larger customer bases, and larger sales forces than Masimo, and have ties with group purchasing organizations ~~(GPOs)~~(“GPOs”) and other purchasers that are stronger than ours. As a result, the Compensation Committee recognizes the importance of attracting and retaining a strong management team with sufficient knowledge, expertise and vision to be able to compete against these larger competitors. In addition, the medical device industry is characterized by rapid product development and technological advances, which require our management team to be very adept at managing these key areas of the business. ~~The~~As a result, the Compensation Committee ~~also~~ recognizes ~~that~~ the ~~Company’s long term success depends upon the development~~importance of attracting and ~~successful commercialization of~~retaining a strong management team with sufficient knowledge, expertise and vision to be able to compete against these larger competitors and to develop and commercialize new products, new orand improved technologies and ~~additional~~new applications for our existing technologies. In that regard, the Compensation Committee recognizes that it is critical to attract, develop and retain a senior management team capable of managing and, in fact, excelling within this very competitive marketplace.

The Compensation Committee is cognizant of the fact that this management team, under the leadership of Joe Kiani, has managed the Company through some very difficult economic periods, as well as a challenging and changing U.S. hospital market environment, over the past five years. Yet, despite that environment, the management team has successfully continued to deliver top line product revenue growth of approximately three times the industry average; introduced new, revolutionary products (both rainbow and non-rainbow); implemented new technologies designed to protect the Company’s intellectual property; continued to expand our patent portfolio and acquired and integrated new, complementary technologies such as SEDLine, Spire Semiconductor and Phasein. Despite the difficult business environment and costs associated with protecting the Company’s technologies and new acquisitions, Masimo has been able to maintain relatively strong product gross profit margins and overall operating performance.

The Compensation Committee recognizes that one of its key objectives for executive compensation is to attract, retain and motivate the best executive talent. The focus is to tie short- and long-term cash and equity incentives to the achievement of corporate objectives and to align executives’ incentives with stockholder value creation. To achieve these objectives, the Compensation Committee has adopted a compensation approach that ties a substantial portion of executives’ overall compensation to our short- and long-term financial and stock price performance. As part of this process, we must match market cash compensation levels and satisfy the day-to-day financial requirements of our executives through competitive base salaries and cash bonus opportunities. Accordingly, our compensation philosophy has been to maintain a competitive pay posture for total compensation, as well as components of total compensation.

Our compensation program is intended to help us achieve ~~the following goals:~~

~~align our executive officers’ compensation with our business objectives~~ and ~~the interests of our stockholders;~~

foster a goal-oriented, highly-motivated management team ~~whose participants have~~with a clear understanding of business objectives ~~and~~with shared corporate ~~values;~~values.

The Board and

~~enable us to attract, retain~~ Compensation Committee believe that executive pay opportunities, and ~~motivate a world-class leadership team~~in particular the CEO’s pay, should be tightly linked with Company financial performance. This perspective is illustrated by the chart on page 28 of this Proxy Statement, which shows the percentages of the CEO’s total target direct compensation (base salary, target annual bonus, target multi-year bonus and ~~individual contributors.~~long-term incentive grant values) that are at-risk and performance-based.

2. Role of the Compensation Committee

The Compensation Committee approves, administers and interprets our executive compensation and benefit policies. The Compensation Committee consists of directors who are “outside directors” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “~~Code~~”“Code”), and “non-employee directors” for purposes of Rule 16b-3 under the Exchange Act. The Compensation Committee is currently comprised of ~~Dr. Coleman,~~ Mr. ~~Lasersohn and effective~~Fitch (effective as of ~~April 3, 2014,~~February 26, 2015), Mr. ~~Reynolds. Dr. Coleman is~~Harkin (effective as of December 16, 2015) and Mr. Reynolds (the current Chairperson of the Compensation ~~Committee chairperson. Dr. Barker was a member of our Compensation Committee through October 24, 2013.~~Committee).

In carrying out its functions, the Compensation Committee evaluates our compensation practices with a focus on the degree to which these practices reflect our executive compensation philosophy, develops recommendations and makes decisions that it believes further our philosophy or align with developments in best compensation practices, and reviews the performance of our executive officers ~~and makes~~when making decisions with respect to their compensation.

The Compensation Committee considers recommendations from ~~Joe Kiani,~~ our CEO in determining executive compensation. While Mr. Kiani discusses his recommendations with the Compensation Committee, Mr. Kiani ~~recuses~~excuses himself from meetings when the Compensation Committee makes determinations regarding his compensation. None of our other executive officers ~~participates~~participate in the Compensation Committee’s ~~discussions~~determinations regarding executive compensation. The Compensation Committee does not delegate any of its functions to others in deciding executive compensation.

~~To assist management and~~Since September 2012, FW Cook has provided compensation consulting services to the Compensation Committee in assessing and determining competitive compensation ~~packages, beginning in September 2012, the~~packages.

The Compensation Setting Process

The Compensation Committee ~~retained FW Cook to provide compensation consulting services. FW Cook is independent from Masimo and has received compensation from Masimo only for services provided to the Compensation Committee.~~

In making its executive compensation decisions in 2013, the Compensation Committee reviewed consolidated compensation information from a peer group of companies and more general compensation survey data. Although the Compensation Committee references the data provided by third party sources to gain a general understanding of market compensation levels, we dodoes not engage in formal benchmarking against other companies’ compensation programs or practices to establish our compensation levels or make specific compensation decisions

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with respect to our executive officers or other employees. ~~See “The Benchmarking Process” on page 29 for~~Instead, in making its executive compensation determinations, the Compensation Committee reviews information summarizing the compensation paid at a ~~description~~representative group of companies, to the extent that the executive positions at these companies are considered comparable to Masimo positions and informative of the ~~process.~~competitive environment, and more broad-based compensation surveys to gain a general understanding of market compensation levels.

With respect to 2015 compensation decisions, the Compensation Committee had available two competitive assessments of compensation levels for NEOs prepared by FW Cook, one prepared in March 2014 and another prepared in August 2015. The competitive market data was obtained from the SEC filings of a representative group comprised of publicly-traded companies classified as health care equipment and supplies companies in the Global Industry Classification Standard Code, the same classification as Masimo. The August 2015 representative group generally overlapped the March 2014 representative group, but differed insofar as it was determined that the representative group should be updated by adding two companies to the group (Cantel Medical Corporation and Invacare Corporation) to replace two companies (ArthoCare Corporation and Volcano Corporation) that had been acquired subsequent to the March 2014 report. In selecting the 2015 representative group, the objective was to choose companies that resulted in Masimo being near the median of the representative group in both revenue and market capitalization. The following were identified as comparable representative companies for the August 2015 study:



Align Technology, Inc.	Analogic Corporation	Cantel Medical Corporation	CONMED Corporation	Cyberonics Corporation⁽¹⁾
Globus Medical, Inc.	Greatbatch, Inc.	Haemonetics Corporation	ICU Medical, Inc.	Insulet Corporation
Integra LifeSciences Holding Corporation	Invacare Corporation	Merit Medical Systems, Inc.	Neogen Corporation	NuVasive, Inc.
Sirona Dental Systems, Inc.	Thoratec Corporation⁽²⁾	West Pharmaceutical Services, Inc.

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___________


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


⁽²⁾	Thoratec Corporation was acquired by St. Jude Medical, Inc. on October 8, 2015.

The companies included in the FW Cook report had median revenues of $615.0 million, ranging from $294.7 million to $1.39 billion, based on the four fiscal quarters ended nearest to September 30, 2015, and a median market capitalization of $2.15 billion, ranging from $584.9 million to $6.13 billion, as of December 31, 2015. By way of comparison, Masimo’s revenues of $617.9 million for its four fiscal quarters ended October 2, 2015 and market capitalization of $2.09 billion as of December 31, 2015 placed it at the 50^th and 43^th percentile among the companies in the study.

3. Components of our Compensation Program

~~Our compensation program is currently comprised of five components:~~

~~base salary;~~

~~annual bonuses;~~

~~equity-based incentives, in the form of stock options;~~

~~other benefits; and~~

~~severance and termination protection.~~

We chose to build our executive compensation approach around ~~these elements because we believe that together they have been~~five distinct components: (1) base salary; (2) cash bonuses; (3) equity-based incentives; (4) other benefits; and ~~will continue to be effective in achieving our overall objectives.~~(5) severance and termination protection. We utilize short-term compensation, including base salary and annual cash bonuses, to motivate and reward our key executives. We believe that, in addition to base salaries and annual bonuses, long-term incentives in the form of multi-year cash bonuses and equity awards, are a very effective tool in attracting and retaining strong executive talent. The use and weight of each compensation element is based on a subjective determination by the Compensation Committee of the importance of each element in meeting our overall objectives. ~~We believe that, in addition to base salaries and bonuses, long-term incentives in the form~~A full description of ~~equity awards are a very important compensation-related motivator in attracting and retaining qualified employees.~~each compensation component is included below:

Base Salary - Base salary is used to provide each named executive officer (“NEO”) a set amount of money during the year with the expectation that he will perform his responsibilities to the best of his ability and in the best interests of Masimo. Base salaries are intended to attract and retain executive talent and typically recognize the experience, skills, knowledge and responsibilities required of each executive officer, as well as competitive market conditions.


2.	Cash Bonuses - Cash bonuses are intended to motivate our executive officers to achieve specified financial goals and operating objectives. These bonuses may be paid under an annual cash bonus plan and/or a multi-year cash bonus plan:

(a) ~~Base Salary~~.

Base salary is used to provide each named executive officer a set amount of money during the year with the expectation that he will perform his responsibilities to the best of his ability and in the best interests of Masimo. Base salaries will typically be used to recognize the experience, skills, knowledge and responsibilities required of each executive officer, as well as competitive market conditions.

In response to the new Medical Device Tax in 2013, the Compensation Committee and management concluded that there would not be any merit salary adjustments to employees in 2013, including the NEOs. As a result, our NEOs' salaries for 2013 were held flat with levels set in July 2012.

Also in response to the Medical Device Tax, in early 2013, the CEO recommended to the Compensation Committee that his salary be temporarily reduced by 5% to support the Company’s cost containment programs designed to reduce the impact of the new Medical Device Tax. Accordingly, the Compensation Committee accepted his recommendation and his salary was temporarily reduced to $712,545, effective January 1, 2013. As a result of the decision to not make any merit salary increases in 2013, our CEO’s base salary remained at that level throughout 2013.

~~The base salaries for our NEOs as of December 28, 2013 were as follows:~~

Name Salary
Joe Kiani $ 712,545
Mark P. de Raad 334,442
Jon Coleman 332,410
Rick Fishel 335,669
Yongsam Lee 329,244

~~(b)~~ Annual Incentive Cash ~~Bonuses.~~

Bonuses -The Compensation Committee approves the annual incentive cash bonuses for all executive officers. These bonuses, if earned, are paid after the end of the calendar year. We ~~paid~~currently expect to pay the fiscal 2015 incentive bonuses to our executive officers onin March ~~14, 2014,~~2016, pursuant to our Executive Annual Cash Bonus Plan ~~for our fiscal year 2013.~~

~~Bonuses paid to our NEOs for 2013 were governed by our~~ (“Executive Annual ~~Plan. The Executive Annual Plan also covers bonuses payable to our other executive officers.~~ Plan”) for fiscal 2015.

To be eligible for a bonus under the plan for any plan year, the participant must be employed with us for at least ~~six months and one day~~twenty-six full weeks during the plan year.

Pursuant to the terms of the Executive Annual Plan, the ~~2013~~2015 bonus award for each NEO was calculated based upon the product of:

•the NEO’s base salary as of the end of ~~2013,~~2015, multiplied by

•the Target Bonus Percentage factor applicable to the NEO, multiplied by

•the applicable Company Factor assigned by the Compensation Committee to the NEOs, multiplied by

•the ~~NEOs~~NEO’s Individual Factor.

Target Bonus Percentage - . The ~~2013~~2015 Target Bonus Percentage for the CEO was 100% of base salary, consistent with ~~2012.~~2014. The Target Bonus Percentage for the other NEOs was 50% of base ~~salary.~~salary, also consistent with 2014. In determining these Target Bonus Percentages, the Compensation Committee took into account several factors, including its belief that the CEO continues to play a critical role in Masimo’s overall success and his efforts are central to the future success of the Company. In addition, competitive data

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that was obtained from ~~the compensation consultant,~~ FW Cook indicated that the median target bonus percentage for CEOs was 100%, and that a 50% bonus target for other executive officers, including other NEOs, approximated median levels among comparable companies.

Company Factor - . Under the Executive Annual Plan, the Compensation Committee reviews Company performance for the ~~CEO~~NEOs under two key financial ~~metrics~~targets and for NEOs other than the ~~other NEOs, under these same two financial metrics, as well as~~CEO, also considers certain additional operational ~~metrics,~~targets, all of which are ~~established at the commencement of the~~determined early in each fiscal year. The ~~metrics~~financial targets are not given any particular weighting and ~~the targeted goals~~ do not individually equate to any particular payout. Instead, if the Compensation Committee determines that (i) we did not achieve 100% of the two financial targets and, with respect to the NEOs other than the CEO, the operational objectives, the Compensation Committee can set the applicable 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 applicable 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 applicable Company Factor at or above 100%~~, in its discretion.~~. The Compensation Committee may also allow the CEO to recommend whether, based on his own subjective analysis, the applicable Company Factor, as approved by the Compensation Committee, should be lowered.

While the structure of the Executive Annual Plan gives the Compensation Committee significant flexibility in setting the Company Factor to take into account factors that do not lend themselves to a strictly quantitative evaluation, the Compensation Committee believes it has responsibly exercised this flexibility in a manner that fairly takes into account the overall performance of the Company, as evidenced by the Company Factors approved from 2011 through 2014:

Fiscal 2011 - 50%

Fiscal 2012 - 73%

Fiscal 2013 - CEO - 100% and other NEOs - 85% (The difference reflects the fact that the Company Factor for the CEO is based solely on the combined financial targets, which exceeded 100%, while the Company Factor for the NEOs also includes evaluation of performance against the operational targets, which was below 100%.)

Fiscal 2014 - 100%

Individual Factor - The Compensation Committee determines the Individual Factor for the CEO by assessing his overall performance for the year, provided that if the Compensation Committee has determined that each of the financial targets included in the Company Factor is met or that the Company Factor is 100%, then the CEO automatically receives a bonus equal to at least 100% of his applicable base salary. For ~~2013,~~all of our NEOs other than our CEO, the Individual Factor is determined by the Compensation Committee taking into account recommendations from our CEO based upon his assessment of each other NEO’s performance of the job-related duties and responsibilities assigned to such NEO during the year.

(b) Multi-Year Cash Bonuses - Our Compensation Committee adopted the Amended Executive Multi-Year Plan to provide our executive officers with an increased incentive to consider a long-term focus and deliver exceptional operational and financial results in a plan period covering three consecutive calendar years. The Amended Executive Multi-Year Plan was adopted on March 13, 2014 and is effective for the plan period of January 1, 2014 to December 31, 2016 (“Plan Period”). The prior plan period covered fiscal 2008 through fiscal 2010 and no similar plan was effective for fiscal 2011 through fiscal 2013. Our executives are eligible to receive a cash bonus at the end of an applicable three-year plan period based on our achievement of certain financial targets (described below) established by our Compensation Committee for the period as long as they have been employed with us for at least the last 18 months during the plan period. Amounts payable under the Amended Executive Multi-Year Plan are prorated based on the number of full weeks during the plan period in which the participant is employed with us, subject to the 18-month employment requirement discussed above.

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Pursuant to the terms of the Amended Executive Multi-Year Plan, the bonus award for each NEO for the Plan Period will be calculated based upon the product of:

•the three-year average base salary paid to the NEO, multiplied by

•the Multi-Year Performance Bonus Percentage factor applicable to the NEO, multiplied by

•the applicable Company Factor assigned by the Compensation Committee, multiplied by

•the NEO’s Individual Factor, multiplied by

•three.

Multi-Year Performance Bonus Percentage - The Multi-Year Performance Bonus Percentage for the CEO and other NEOs are 100% and 50%, respectively. In determining the Multi-Year Performance Bonus Percentages, the Compensation Committee focused on the critical roles that the CEO and the other NEOs play in the long-term business and financial performance of the Company.

Company Factor - Under the Amended Executive Multi-Year Plan, the Compensation Committee reviews Company performance under specific objective assessment criteria. The criteria established for the Plan Period consists of two key financial targets: GAAP product revenue and GAAP diluted earnings per share. The financial targets under the Amended Executive Multi-Year Plan, which were established when the plan was adopted, were intended to be “stretch goals” that were even more aggressive than the targets established under the Executive Annual Plan. The criteria are not given any particular weighting and the specific targeted goals do not equate to any particular payout. At the end of the Plan Period, the Compensation Committee, with the input of the CEO, will evaluate performance against the criteria and, along with any other relevant financial or Company performance measures that the Compensation Committee determines to be relevant, establish a Company Factor ranging from 0% to above 100%.

Individual Factor - The Compensation Committee determines the Individual Factor for the CEO by assessing his overall job performance for the Plan Period. For all of our NEOs other than our CEO, the Individual Factor is determined by the Compensation Committee taking into account recommendations from our CEO based upon his assessment of each other NEO’s overall job performance during the Plan Period, as well as the assessment of the NEO’s supervisor, if not the CEO.

(c) Discretionary Cash Bonuses - Our Compensation Committee may, from time to time, approve discretionary cash bonuses for any NEO based on specific facts and circumstances that the Compensation Committee believes warrant special recognition. No discretionary cash bonuses were approved or paid in 2015 and only one discretionary bonus was approved during the past three fiscal years.

Equity-Based Incentives - Masimo uses equity-based incentives to retain executives, reward longer-term performance and align the interests of our executive officers with those of our stockholders. Since Masimo’s initial public offering in August 2007, the exclusive form of equity incentive has been stock options, other than the RSU award granted to Mr. Kiani in connection with the amendment and restatement of his employment agreement (See “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement for additional details). We believe that stock options are an effective tool for meeting our compensation goal of increasing long-term stockholder value because stock options only have value if the Company’s stock price rises above the option exercise price. Masimo believes this direct alignment, plus the fact that stock options are well understood by executives, have made them an effective motivational tool and focused executives on results that directly improve the long-term performance of the Company. The stock options granted by Masimo typically vest over a five-year period with 20% vesting on each anniversary of the grant date. Their exercise price is set as the closing price of our common stock on the grant date.

As previously noted, in connection with the November 2015 amendment and restatement of Mr. Kiani’s employment agreement, our Compensation Committee granted Mr. Kiani an RSU award with respect to 2.7 million shares of common stock. This RSU was granted to Mr. Kiani in consideration for Mr. Kiani agreeing to

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make certain amendments to his prior employment agreement, including the elimination of certain obligations of the Company under the prior employment agreement.


4.	Other Benefits - We utilize a competitive package of fringe benefits to attract and retain our employees and executives. These benefits include:

(a)

Retirement Savings Plan - We maintain a 401(k) defined contribution plan in which all of our employees age 18 and older are entitled to participate, with our NEOs participating on the same terms as all other eligible employees. Employees may contribute their own funds, as salary deductions, on a pre-tax basis. Contributions may be made up to plan limits, subject to government limitations. The plan permits us to make matching contributions and we have historically provided contributions that match eligible employee contributions, which contributions are generally limited to 3% of compensation (federal tax law limits the amount of employee compensation that can be taken into account for this purpose). Matching contributions vest, starting at 50% of eligible employee contributions, when an employee has been employed for two years. The vesting percentage increases to 75% of eligible employee contributions when an employee has been employed for three years and to 100% when an employee has been employed for four years.

(b)

Health and Welfare Plans - We provide health care, dental, vision and life insurance, an employee assistance plan and both short-term and long-term disability, accidental death and dismemberment benefits to all full-time employees, with our NEOs participating on the same terms as all other eligible employees. These benefits are subject to applicable laws and at benefit levels that we believe are generally consistent with the benefits of companies with which we compete for employees.

(c)

Executive Benefits - Certain NEOs are eligible to receive an auto allowance based on their job duties. In addition, under our CEO’s employment agreement, we reimburse Mr. Kiani for all reasonable travel and lodging expenses, which include travel and hospitality expenses for first class travel and accommodations, including travel by private or chartered aircraft, for his family and household members if they accompany him during business travel. We feel that this is appropriate because of the extensive travel requirements of Mr. Kiani’s job. We also 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. In addition, as part of the Compensation Committee’s request that Mr. Kiani engage in discussions to amend his prior employment agreement, Mr. Kiani’s legal costs incurred in connection with the amendment to his prior employment agreement were paid on his behalf by the Company. We have reported the actual amounts paid by the Company for Mr. Kiani’s family and household members to accompany him during his business travel, for such security arrangements for Mr. Kiani that were not security arrangements provided at the company’s business facilities, and for the legal costs related to his amended employment agreement in the “All Other Compensation” column in the Summary Compensation Table.


5.	Severance and Termination Protection - Severance and termination protection benefits are intended to attract and retain executive talent as well as facilitate management transitions, and include:

(a)

CEO Employment Agreement - Under his employment agreement with us, Mr. Kiani is entitled to certain severance and change in control benefits, the terms of which are described in detail below under “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani”. In general, under the agreement, in the event of certain terminations of Mr. Kiani’s employment, Mr. Kiani is entitled to two times salary and bonus as a severance payment, the 2.7 million RSUs granted to him in November 2015 will vest in full and he will be entitled to receive a cash payment of $35.0 million; provided that each year beginning on January 1, 2018 the number of shares to be issued to Mr. Kiani pursuant to the RSU award and the cash payment will each be reduced by 10% of the original amount.

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(b)

Severance Protection Plan - The Board adopted our 2007 Severance Protection Plan, which became effective on July 19, 2007 and was amended on December 31, 2008, the terms of which are described in detail below under “2007 Severance Protection Plan”. Under the terms of this plan, participants are entitled to a cash payment ranging from 12 months to 24 months of base salary plus bonus and other benefits upon their termination under certain circumstances. In addition, for most participants, the plan provides for equity acceleration as to 50% of their awards upon a change in control and 100% of their awards upon a covered termination in connection with a change in control. The NEOs other than Mr. Kiani all participate in our 2007 Severance Protection Plan. See “2007 Severance Protection Plan” below for additional information.

Fiscal 2015 Year NEO Compensation

NEO Base Compensation:

The Compensation Committee approved 3% base salary increases for each of our NEOs, effective July 6, 2015, in each case after taking into account market data, the particular responsibilities and accomplishments of the executive in question, considerations of horizontal equity among executives, competitive considerations and other relevant factors. Pursuant to the amendment and restatement of Mr. Kiani’s employment agreement in November 2015, the Compensation Committee approved an additional increase of Mr. Kiani’s base salary to $1,000,000 effective as of August 1, 2015 (see “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement for additional information regarding the terms of the Restated CEO Employment Agreement). In addition, the Compensation Committee approved additional base salary increases for Messrs. de Raad and Sampath, effective as of October 26, 2015, based on the recommendations of our CEO and the Compensation Committee’s review of external competitive market compensation data related to each of the NEO’s positions.



Name	Base Salary as of January 3, 2015		Base Salary as of January 2, 2016		% Change
Joe Kiani	$	769,549	$	1,000,000	30.0	%
Mark de Raad	344,475		390,000		13.2
Anand Sampath	345,041		420,000		21.7
Rick Fishel	345,739		356,111		3.0
Jon Coleman	342,382		352,654		3.0

NEO Annual Cash Bonuses:

For 2015, as in prior years, the Compensation Committee determined that the financial targets for the Company Factor should focus on two critical financial ~~metrics~~targets that it believes drive our growth and long term stockholder value: product revenues and ~~earnings per share. The~~diluted EPS. These financial targets ~~under these financial metrics~~ were (a) total GAAP product revenues of ~~at least $520~~$577.0 million, and (b) GAAP ~~earnings per share~~diluted EPS of ~~at least $1.14. In 2013, with~~$1.30. For fiscal 2015, our total GAAP product revenues ~~of $517.4~~were $599.3 million ~~we achieved 99.5%~~which exceeded the target by $22.3 million, or nearly 4%. For fiscal 2015, our total GAAP diluted EPS was $1.55, up $0.25, or approximately 19% in excess of the ~~adjusted revenue goal. Our GAAP fiscal year 2013 earnings per diluted share were $1.02. However, this included 2013 fourth quarter charges of $0.15 related~~target.

In addition to ~~an arbitration award and related legal expenses, as well as various inventory and equipment write-downs. Because these charges were considered unusual,~~ the Compensation Committee decided that exclusion of certain of these charges from the Company Factor calculation was appropriate, yielding an adjusted earnings per diluted share measurement of $1.16 and an adjusted achievement percentage of 101.8% of the earnings per share goal. Although the combinedtwo financial ~~metrics performance exceeded 100%, the Compensation Committee determined that the overall level of achievement against such financial metrics would be limited to 100%.~~

~~The~~targets noted above, other operational ~~metrics~~targets used to determine the Company Factor for the NEOs other than the CEO were comprised of the following:


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


(ii)	measure and improve our ~~quality;~~quality compared to our competitors;


(iii)	~~increase shipments~~achieve a specified level of OEM ~~boards~~board and ~~monitors;~~Masimo monitor shipments;


(iv)	~~increase~~achieve a specified level of single patient adhesive and disposable ~~sensors~~sensor shipments; and ~~monitors;~~


(v)	~~increase our revenues from our SpHb~~achieve a specified level of rainbow^®~~and rainbow Acoustic~~^®~~Monitoring products;~~product revenues.


~~(vi)~~	~~increase the hospital beds using continuous monitoring; and~~


~~(vii)~~	~~improve succession planning at all levels of the organization.~~

These operational metrics involved both objective and subjective measurement criteria. The objective metric criteria related to the following: (i) OEM boards and monitor shipments, (ii) single patient adhesive and disposable sensor and monitor

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~~shipments, (iii) SpHb~~^® ~~and rainbow Acoustic~~^® ~~Monitoring product revenues, and (iv) the number of devices ordered for general floor monitoring deployment.~~

In setting the ~~2013~~2015 Company Factor objectives, the Compensation Committee believed that, ~~they were achievable, but not easily attainable,~~ provided that there was a maximum and sustained effort from each level of our ~~organization. At~~organization, the goals were achievable but not easily attainable.

Following the end of the fiscal year, ~~end,~~ Mr. Kiani provided to the Compensation Committee with his assessment of the ~~Company's~~Company’s performance against the subjective and objective operational ~~objectives applicable~~measurement criteria. With respect to the subjective criteria, Mr. Kiani noted that the Company had, as a result of additional resources and customer focused initiatives, been able to dramatically improve the Company’s customer retention rates. Mr. Kiani also noted that the Company continued to make improvements in its key internal metrics related to improved quality, including on-time delivery, first pass yields and other ~~NEOs. Despite high percentage achievements in both its~~ manufacturing and operational metrics, as well as cost reduction initiatives. Mr. Kiani also reviewed the operational goals, noting the previously reported public data with respect to Masimo’s fiscal 2015 OEM board and monitor shipments of 182,600 units and rainbow^®product ~~revenue and earnings per share goals,~~revenues of $61.8 million. Mr. Kiani indicated that ~~some~~the Company achieved 114% of its OEM board and Masimo monitor shipment goal of 160,000 units, 103% of its single patient adhesive and disposable sensor goal and 103% of its rainbow^® product revenues goal of $60.0 million. Mr. Kiani also noted other key activities occurring during fiscal 2015 that required substantial senior management time and focus, including various litigation and trial activities, successful value engineering projects and the ~~operational goals~~introduction of a number of new technologies (ORI^™, O3^™, etc.) and products (Root^® with vital signs, MightySat^™, etc.). Although still subject to appeal, Mr. Kiani also noted ~~above~~that in May 2015, the court had ~~not achieved~~upheld the ~~overall target levels established at~~Company’s patent litigation jury damages award against Philips of $466.8 million from October 2014. Mr. Kiani also noted the ~~beginning~~successful settlement of a patent infringement lawsuit with Mindray Biomedical Electronics Co., Ltd. and certain of its affiliates (collectively, “Mindray”) during the ~~year. Therefore,~~fourth quarter of fiscal 2015, pursuant to which Mindray paid Masimo $25.0 million and assigned certain of its patents to Masimo.

Based on these significant 2015 achievements, including the higher than planned product revenues (actual of $599.3 million as compared to the original $577.0 million target) and GAAP earnings per share (actual of $1.55 as compared to the $1.30 target), Mr. Kiani recommended ~~and~~a 105% Company Factor for 2015. After a careful review of the results of the 2015 key financial targets, the other operational targets, as well as the other achievements noted by Mr. Kiani, the Compensation Committee agreed to ~~an overall~~set the 2015 Company Factor ~~achievement for the other NEOs of 85% for the year.~~at 105%.

Individual Factor. The Compensation Committee determined the Individual Factor for the CEO by assessing his overall performance for the year, provided that, pursuant to the terms of the Executive Annual Plan, if the Company Factor had been at least 100%, the CEO’s Individual Factor automatically would have been 100%. In addition, in accordance with the Executive Annual Plan, the CEO’s employment agreement provides that if we meet our financial targets under our annual bonus program, Mr. Kiani is entitled to a bonus equal to 100% of his base salary (or such higher percentage approved by the Compensation Committee).year. For all of our NEOs other than our CEO, the Individual Factor was determined by the Compensation Committee ~~based solely upon~~taking into account the recommendations from our CEO based upon his assessment of each other ~~named executive officer’s~~NEO’s performance of the job-related duties and responsibilities assigned to such ~~named executive officer~~NEO during ~~2013.~~

2015. The Compensation Committee ~~determined that the CEO’s~~believed a 100% Individual Factor was appropriate for ~~2013 should be 100% under~~our CEO given the ~~terms~~significant 2015 accomplishments and the continued outstanding leadership provided by Mr. Kiani relative to many of the ~~Executive Annual Plan, given~~other external legal and regulatory factors that ~~the Company achieved its financial targets for product revenues (99.5%)~~continued to require a significant amount of Mr. Kiani’s time and ~~adjusted~~attention. Mr. Kiani’s key notable 2015 achievements included:


•	Total GAAP product revenues grew by 7.6% to $599.3 million from $556.8 million or by 11.0%, to $618.0 million, on a constant currency basis.⁴ Both these numbers dramatically exceeded the Company’s original fiscal year 2015 expectations;

Total GAAP earnings per share of $1.16 (101.8%). The Compensation Committee believes that the CEO has continued to demonstrate outstanding management performance in successfully guiding Masimo through a challenging and changing environment.

~~The 2013 accomplishments that were considered in determining our CEO’s Individual Factor include:~~

~~Total product revenues~~ grew by ~~11.3%, approximately~~19.2% to $1.55 per diluted share from $1.30 per diluted share in the prior year;


•	Total revenues grew by 7.4% to $630.1 million from $586.6 million in the prior year period. On a constant currency basis⁵, total revenues grew by 10.6% to $648.8 million from the prior year period;

The total product revenue and total revenue growth rates noted above are estimated to be between two to three times the overall industry ~~average.~~

~~Revenues from rainbow products grew 21.3%.~~growth rates;


•	Shipments of Masimo SET^® and Masimo rainbow^® SET^®™ pulse co-oximetry boards and monitors rose ~~15%~~ to ~~168,000 units from~~a record 182,600, yielding an estimated annual growth in our installed base of approximately ~~146,000 units in 2012.~~6.4%;

~~The successful integration~~

⁴ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

⁵ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

| 2016 Proxy Statement

Table of the Company’s 2012 acquisitions of Phasein and Masimo Semiconductor. Since our acquisition of Phasein, total capnography revenues have risen approximately 25%, more than originally anticipated. In addition, Masimo Semiconductor will deliver, ahead of schedule, new Masimo light-emitting diodes (LEDs) that will provide for both higher product efficiency and lower cost.Contents

~~Key new products were introduced, including:~~


•	~~Root~~Record volume shipments of Masimo’s pulse oximetry and rainbow^® adhesive sensors;

Completion and implementation of numerous value engineering initiatives;

The introduction of new technology and products, including:


▪	MightySat^™~~, an intuitive patient monitoring and connectivity platform that has the potential to transform patient care from the operating room to the general floor;~~ fingertip pulse oximeter for personal use;

•▪

~~EMMA~~Patient SafetyNet Series 5000^™~~, a capnograph~~ along with ~~waveform display, offers clinicians greater assessment of end-tidal carbon dioxide (EtCO2)~~Iris^™ Connectivity and ~~respiration rate, as well as assists in recognition of return to spontaneous circulation, for a variety of clinical settings, including emergency medicine~~MyView^™ through the Root^® patient monitoring and ~~transport, operating rooms, intensive care units, patient rooms,~~connectivity platform; and ~~clinics;~~


•▪	~~iSpO2~~^™~~, a pulse oximeter cable and sensor utilizing Masimo SET~~Root^® ~~technology for use~~connectivity and patient monitoring platform with ~~iPhone, iPad or iPod touch with 30-pin connector;~~noninvasive blood pressure and temperature capabilities.

~~Masimo repurchased 1.0~~The repurchase of approximately 4.1 million outstanding shares, ~~totaling $19.8 million,~~ representing a return of ~~36.4%~~135.7% of ~~2013~~fiscal 2015 cash generated from ~~operations. This continued Masimo’s track record~~business operations; and

The settlement of Company litigation with Mindray pursuant to which Mindray paid $25 million to Masimo and assigned certain of its patents to Masimo.

With respect to the Individual Factors for the other NEOs, the Committee took into account the fact that fiscal 2015 included many new management challenges that required careful attention and focus by the executive management team - both as a team and as selected groups of executive management team members. These challenges were not limited to internal operations of the Company but also involved having to address a number of external issues, including multiple legal matters that requiredsignificant time and attention. Each of the Board, Compensation Committee and the CEO recognized that 2015 required extensive time and effort from the management team that significantly exceeded the already high levels of ~~return to stockholders resulting in the return of approximately 95% of the cash generated~~activity expected from ~~operations over the last six years to stockholders in the form of dividends and stock repurchases.~~

~~In addition, each~~its senior officers. Each NEO (other than the CEO) had functionally specific goals and objectives that were set by the CEO and NEOs at the beginning of the year, which were designed to contribute to the achievement of our corporate objectives. Based on the CEO’s review of the level of achievement of the individual, non-financial factors for each of the other NEOs, as well as the overall ~~Executive~~executive and management contributions, the CEO recommended ~~and the Compensation Committee agreed that the 2013~~specific 2015 Individual ~~Factor~~Factors for ~~all other NEOs should be 100%.~~each NEO. These determinations were based in part on the following summary of the overall management contributions and each ~~NEOs~~NEO’s performance during ~~2013.~~

Fiscal 2013 included many new management challenges that required careful attention and focus by the executive management team - both as a team and as selected groups of executive management team members. These challenges were not limited to internal operations of the company but also involved having to address a number of external issues that requiredsignificant time and attention - all in addition to the executives' roles as functional and organizational leaders. Each of the Board, Compensation Committee and the CEO recognized that 2013 required extensive time and effort from the management team, as a group and as individuals, that significantly exceeded the already high levels of activity expected from senior officers and this was a key factor in the Compensation Committee’s acceptance of the CEO's recommendation of an Individual Factor of 100%.2015.

In addition to the ~~Company performance~~team related factors noted above, Mr. de Raad’s individual achievements included ~~expansion of~~becoming a key leader in developing the Company’s ~~internal management reporting capabilities including expanded standard margin and operating expense reporting, both of which are contributing to~~new financial plan focused on delivering increased ~~forecasting accuracy and accountability. In addition,~~financial leverage. Mr. de Raad ~~worked~~was the primary cross-functional interface in establishing a variety of operational goals designed to both improve efficiencies and lower costs. Working with ~~both~~our manufacturing, operations, engineering, sales, marketing and ~~manufacturing to establish project cost reduction targets~~general and ~~measurement tools necessary to monitor, track and report on the Company’s multi-year focus on overall product cost reduction opportunities.~~administrative organizations, Mr. de Raad helped to drive and ensure that the targeted goals were achieved. In addition to Mr. de Raad’s functional responsibilities, including delivering all internal and external financial reporting obligations on time, he also implemented ~~new Sunshine Act~~a number of reporting improvements that allowed for quicker identification and ~~Medical Device Tax~~ reporting ~~processes and systems, and expanded our travel management processes and controls throughout our international operations in order to realize additional travel cost efficiencies. Internationally,~~of potential risks against the Company’s business plan. Mr. de Raad ~~ensured that~~was also responsible for expanding the Company’s line-of-credit from $250 million to $450 million, which will allow the Company ~~would be able~~ to ~~continue to recognize~~become more opportunistic in deploying capital over the ~~financial benefits from our worldwide business model. In connection with~~next few years. Within Mr. de Raad’s investor relations responsibilities, he ~~attended~~continued to attend numerous investor conferences and support various analyst related events ~~during fiscal 2013,~~focused on ensuring that these constituencies clearly understood the Company’s ~~communication~~renewed focus on financial leverage and, at the same time, also had the opportunity to dialogue with ~~our investors continues to be open~~management. Based on Mr. de Raad’s 2015 achievements, Mr. Kiani recommended, and ~~accommodative.~~the Compensation Committee approved, a 100% individual achievement factor for Mr. de Raad.

~~Mr. Coleman’s individual responsibilities spanned various functional groups, including Worldwide Direct Sales, Marketing and Medical Affairs.~~ During fiscal ~~2013,~~2015, Mr. ~~Coleman’s~~Sampath led a significant number of 2015 key ~~worldwide sales achievements included achieving approximately 100%~~initiatives, including the launch and receipt of FDA clearance for our new MightySat^™ fingertip pulse oximeter. Mr. Sampath was also the key management owner of one of the Company’s ~~worldwide~~most strategically important product ~~revenue target, greatly exceeding~~transitions to a new line of sensors and devices. This complex development was completed on time, allowing the ~~internal targets for annual contract renewals~~Company to complete its migration away from older technology sensors to a redesigned line of sensors that the Company expects will be much more patient friendly and ~~exceeding the internal sales goals for direct business driver placements. Mr. Coleman was also responsible~~will provide important manufacturing efficiencies for the ~~100% achievement of~~Company. Mr. Sampath also led the Company’s ~~2013 goal for devices sold for general floor deployments. Within his international sales organization,~~on-going value engineering efforts, which in fiscal 2015, exceeded the targeted annual

| 2016 Proxy Statement

Table of Contents

manufacturing efficiencies. In Mr. ~~Coleman achieved nearly 100%~~Sampath’s manufacturing role, the Company was able to build and ship a record number of SpO2 and rainbow^® sensors and technology boards, while concurrently working on expanding our production capabilities to support new products. In addition, Mr. Sampath worked extensively to improve the ~~international product revenue goals~~Company’s regulatory processes, requiring collaborative and ~~set records for new hospital department conversions to Masimo technology. Under~~cross-functional process improvements within the marketing, clinical research, regulatory and research and development organizations. Based on Mr. ~~Coleman’s leadership, our international sales organization continued to grow as a percentage of total product revenues, and established the foundation for new sales offices in both India~~Sampath’s 2015 achievements, Mr. Kiani recommended, and the ~~Middle East.~~Compensation Committee approved, a 100% individual achievement factor for Mr. Coleman also manages the U.S. Alternative Care Market, which includes our Post-Acute Care business, our Physician Office business, our EMS business and our direct sales organization. These organizations collectively achieved nearly all of their key functional objectives in 2013. As evidenced by our record year of contract renewals, Mr. Coleman’s Global Professional Services organization was also very successful in ensuring that our customers’ expectations are exceeded.Sampath.

Mr. Fishel’s individual achievements in 2015included a new Company record in ~~our~~ annual OEM board shipments, reflecting a 5% increase over 2014 OEM board shipments. This was the result of Mr. Fishel’s multi-year efforts to continue to expand the number of the Company’s OEM partners as well as increase volume shipments with existing OEM partners. Importantly, the Company’sThe 2015 record OEM board shipments also included a record number of ~~OEMs shipping new~~OEM products shipped with our rainbow^® technology, reflecting a significant 25% year-over-year increase. The increase in board ~~technology.~~shipments, combined with a 33% increase in OEM sales of rainbow^® parameters and accessories, also contributed to 10% growth in annual OEM revenue. In addition, the OEM business executed a significant number of agreements involving the integration of Masimo technology in therapy devices that should lead to continued growth in Masimo OEM shipments while also helping these companies pursue enhanced therapy-delivery applications designed to improve patient safety and outcomes. Throughout ~~2013,~~2015, Mr. Fishel also successfully managed ~~and directed~~ the OEM engineering ~~organization~~team’s efforts to ~~ensure that~~support our growing number of existing OEM partners plus our many new partners integrating Masimo ~~was able~~technologies for the first time, as well as the development of several adaptations of existing Masimo technologies to ~~effectively support all the~~address new OEM partners introducing Masimo technology. In late fiscal 2012, and in addition to his OEM responsibilities, Mr. Fishel was asked to lead an extremely important new project to build a new worldwide blood management sales team. Throughout 2013, Mr. Fishel worked diligently to build out this new worldwide blood management team, and byapplications or the ~~end~~specific needs of ~~2013, such team included 50 professionals, including sales representatives and clinical specialists.~~select OEMs. These achievements were the result of Mr. Fishel’s ~~extraordinary~~continued multi-year efforts ~~resulted in~~to expand the ~~assimilation of our new team much more quickly than had been anticipated~~volume and ~~as a result, we are optimistic about this team’s ability to make a significant contribution to our 2014 product sales.~~

In early 2013, in addition to Mr. Lee’s responsibilities for our Information Technology group and our Regulatory organization, Mr. Lee was asked to assume responsibilities for our Worldwide Manufacturing and Operations organization, a role that Mr. Lee had formerly held within the Company for approximately 10 years. In connection with these additional responsibilities, Mr. Lee led a significant number of 2013 key initiatives, including improved on-time delivery, higher first pass yield and an aggressive focus on component cost reduction efforts. Within his role as our Chief Information Officer, Mr. Lee completed various system upgrades throughout the year adding to overall improved efficiency throughout the organization. Mr. Lee also drove various systems evaluations during 2013, which we expect will lead to important additional information technology solution implementations in 2014. Within his regulatory responsibilities, Mr. Lee focused heavily on working with various regulatory agencies to ensure continued progress on our FDA and CE marked product approvals. Throughout 2013, Mr. Lee was also able to improve the alignmentdiversity of the Company’s ~~internal~~OEM partners, increase shipments with existing OEM partners, and expand the breadth of Masimo’s OEM offerings, all of which serve as valuable catalysts for the Company’s direct sales business. During fiscal 2015, Mr. Fishel also led the Company’s relatively new Blood Management sales organization focused on sales and applications of the Company’s SpHb^® and PVI^® technologies, achieving 30% growth in annual revenues. As a result of Mr. Fishel’s multi-year focus on establishing best practices for the many clinical applications of these unique continuous and non-invasive monitoring parameters, the Company substantially refined its sales and support strategies that should lead to increasing growth from these solutions in the future. Mr. Fishel also provided valuable contributions to the Company’s long term strategic planning efforts in evaluating new business development opportunities. Based on Mr. Fishel’s 2015 achievements, Mr. Kiani recommended, and the Compensation Committee approved, a 100% individual achievement factor for Mr. Fishel.

Mr. Coleman’s individual achievements included leading the Company’s strong fiscal 2015 product ~~delivery dates with~~revenue performance. His specific achievements included growing the ~~necessary regulatory approvals, especially~~U.S. acute care revenues over $300 million for the first time ever. Under Mr. Coleman’s leadership, the Company achieved the second highest amount of new contract conversions and the second highest level of contract renewals in the Company’s history. Mr. Coleman was also responsible for allowing the Company to continue to expand its Patient SafetyNet^™ system and its Root^® platform in the medical/surgical units at leading institutions around the U.S. He was also instrumental in strong year-over-year revenue growth in the U.S. alternate care organization where the post-acute group converted dozens of facilities to Masimo SET^®, and in so doing, established a new record for new contracts from this group. This organization was also a key factor in continuing to drive usage and adoption of SpHb^® in the U.S. Internationally, Mr. Coleman delivered the largest single contract in the Company’s history, a contract that also included a significant amount of rainbow^® technology. Mr. Coleman also took a variety of organizational steps during the year to strengthen our ~~CE marked products.~~business in various key countries outside the United States (“OUS”) that we believe will be critical to our long-term goal of growing our OUS product revenues as a percentage of total product revenues. In addition to these sales related efforts and accomplishments, Mr. Coleman has contributed to a variety of cost savings activities to help drive the Company’s overall focus on increased financial leverage. Based on Mr. Coleman’s 2015 accomplishments, Mr. Kiani recommended, and the Compensation Committee approved, a 105% individual achievement factor for Mr. Coleman.

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Table of Contents

The combination of the applicable Company Factor and the applicable Individual Factor discussed above resulted in the NEOs ~~receiving~~being awarded the following bonus amounts for ~~2013:~~2015:


Name	Bonus		Bonus
Joe Kiani	$	712,545	$	1,050,000
Mark P. de Raad	142,138
Mark de Raad			204,750
Anand Sampath			220,500
Rick Fishel			186,958
Jon Coleman	141,274		194,400
Rick Fishel	142,659
Yongsam Lee	139,929

~~2014 Bonus Plan~~. The corporate level goals under the Executive Annual Plan for 2014 were initially established by the CEO and then reviewed and approved by the Compensation Committee during the first quarter of the year. The 2014 corporate level goals cover the same performance categories used for the 2013 corporate goals as they were determined to once again be the most relevant and appropriate areas of focus for the Company. The Compensation Committee believes that the 2014 goals align well with our strategy of attaining sustainable product and earnings growth and within those key objectives, identifies other significant and important drivers of the business. These targets are based on our fiscal year 2014 operating plan and are intended to be realistic and reasonable, but challenging, in order to drive sustainable growth and performance of the Company in 2014.

(c)NEO Multi-Year Cash ~~Bonuses~~. Our Compensation Committee adopted our Executive Multi-Year Cash Bonus Award Plan (the “Executive Multi-Year Plan”) to provide our executive officers with an increased incentive to deliver exceptional operational and financial results in each three-year plan period. TheBonuses:

As previously noted, the Amended Executive Multi-Year Plan ~~became~~is effective onfor the three-year period of January 1, 2008. We pay bonuses for a plan period under the Executive Multi-Year Plan only if the Executive Multi-Year Plan Administrator has approved written resolutions that either establish the terms and conditions relating2014 to ~~the payment of bonuses that will apply for the plan period, or otherwise approves the payment of bonuses. Each plan period is comprised of three consecutive calendar years.~~December 31, 2016. Our executives ~~are~~will be eligible to receive a cash bonus at the end of ~~an applicable~~this three-year Plan Period based on the Compensation Committee’s evaluation of Company performance against two key financial targets - product revenue and diluted EPS - over the three year plan period, ~~based on~~and such targets are intended to be more aggressive than those under the Executive Annual Plan.

Our total GAAP product revenues for fiscal 2014 of $556.8 million were adjusted by $1.7 million to reflect the impact of actual 2014 foreign exchange (“F/X”) rates versus the rates in effect when the 2014 Executive Multi-Year Plan goals were established. As a result, the F/X adjusted product revenue⁶ total of $558.5 million represented a 97% achievement against the adjusted fiscal 2014 product revenue goal of $574.0 million. At the same time, our $1.30 GAAP earnings per share, when adjusted for the impact of actual 2014 F/X rates versus the rates in effect when the Executive Multi-Year Plan goals were established, yielded F/X adjusted earnings per share⁷ of $1.31, representing a 94% achievement against the adjusted fiscal 2014 earnings per share goal⁸ of $1.40. By way of contrast, the 2014 targets under the Executive Annual Plan for GAAP product revenue was $570 million and GAAP EPS was $1.28.

In fiscal 2015, our GAAP 2015 total product revenues of $599.3 million were increased by $19.9 million due to the impact of actual 2015 F/X rates versus the rates in effect when the 2014 Executive Multi-Year Plan goals were established. As a result, the F/X adjusted product revenue total⁹ of $619.2 million represented a 98% achievement of ~~certain financial~~the original 2015 Executive Multi-Year Plan goal of $630.5 million. At the same time, our fiscal 2015 $1.55 GAAP earnings per share was increased by $0.12, to $1.67, due to the same impact of actual 2015 F/X rates versus the rates in effect when the Executive Multi-Year Plan goals were established. The F/X adjusted earnings per share¹⁰of $1.67 represents a 101% achievement as compared to the adjusted earnings per share goal¹¹ of $1.65. By way of contrast, the 2015 targets ~~established by our Compensation Committee~~under the Executive Annual Plan for GAAP product revenue of $577.0 million and GAAP EPS of $1.30 were significantly lower than the ~~period as long as they have been employed with us~~targets for ~~at least the last 18 months during the plan period. Amounts payable~~these measurements under the Executive Multi-Year ~~Plan are prorated based on~~Plan.

Fiscal 2016 will be the ~~number~~final year of ~~full weeks during~~ the ~~plan period in which~~2014-2016 Executive Multi-Year Plan. Under the ~~participant is employed with us, subject to the 18-month employment requirement discussed above. The first plan period under~~terms of the Executive Multi-Year Plan, ~~began on January 1, 2008 and ended on December 31, 2010. The~~during the first quarter of fiscal 2017, the Compensation Committee ~~adopted a new~~will evaluate the results of the performance delivered over the entire three year plan period and will determine the actual bonus achievement level for the ~~period from January 1,~~current 2014-2016 Executive Multi-Year Plan.

⁶ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix B to this Proxy Statement.

⁷ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix B to this Proxy Statement.

⁸ The original 2014 ~~to December 31, 2016.~~

~~(d) Equity-Based Incentives~~

Masimo uses an equity incentive approach to retain executives, reward longer-term performance and align the interests of our executive officers with those of our stockholders. Long-term performance is achieved through an ownership culture that rewards performance by our executive officers through the use of equity incentives. In addition, equity incentives have provided the principal method for our executive officers to acquire equity interests in Masimo.

~~Since Masimo’s initial public offering in August 2007, the exclusive form of equity incentive has been stock options. We believe that stock options are an effective tool for meeting our compensation~~earnings per share goal of ~~increasing long-term stockholder value by tying~~$1.16 was adjusted upward to $1.40 due to the ~~value~~impact of royalty revenues, which were not part of the ~~stock options~~original 2014 Executive Multi-Year Plan earnings per share goal of $1.16.

⁹ Non-GAAP financial measure - please see reconciliation to ~~our future performance. Stock options provide a direct alignment between executive interests and stockholder interests—stock options only have value if~~GAAP amounts in Appendix B to this Proxy Statement.

¹⁰ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix B to this Proxy Statement.

¹¹ The original 2015 earnings per share goal of $1.33 was adjusted upward to $1.65 due to the Company’s stock price goes up. Masimo believes this direct alignment, plus the fact that stock options are well understood by executives, have made them an effective motivational tool and focused executives on results that directly improve the long-term performanceimpact of royalty revenues, which were not part of the ~~Company. The stock options issued by Masimo typically vest over a five-year period with 20% vesting on each anniversary~~original 2015 Executive Multi-Year Plan earnings per share goal of ~~the grant date. Their exercise price is set as the closing price~~$1.33.

| 2016 Proxy Statement

Table of ~~our common stock on the grant date, as reported by NASDAQ.~~Contents

NEO Equity-Based Incentives:

The number of options awarded to each executive officer takes into account his sustained performance over time, ability to impact our results that drive stockholder value and level of responsibility within ~~Masimo, potential to fill roles of increasing responsibility, and competitive equity award levels for similar positions in comparable companies.~~Masimo. In general, equity forms a key part of the overall compensation for each executive officer and is evaluated each year as part of the annual performance review process and incentive payout calculation.

On ~~May 28, 2013,~~March 20, 2015, each of our NEOs other than the CEO was granted 30,000 stock options. The size of the grants to our other NEOs is generally consistent with the size of the annual option grants made to our other NEOs in prior years, and was determined by the Compensation Committee in their business judgment after a recommendation from our CEO.

Pursuant to his prior employment agreement, our CEO was granted 300,000 stock options ~~and the other NEOs were granted 30,000 options. No options were granted in 2012~~on June 15, 2015. The annual grant to the CEO of an option to purchase 300,000 shares is only required under the Restated CEO Employment Agreement until fiscal 2017. After fiscal 2017, there are no guaranteed or minimum grants of stock options or any other type of equity required under the ~~other NEOs.~~Restated CEO Employment Agreement.

The Compensation Committee believes that the ~~2013~~2015 option grants ~~were important in providing a greater emphasis on equity compensation of our executives in order~~continued to ~~better~~ align the long-term incentives of our executives with our stockholders. ~~This~~

~~greater emphasis is~~Our equity-based incentives are also consistent with Masimo’s stock ownership policy that was adopted in January 2012, which requires the CEO to hold shares of Masimo stock with a value equal to at least six times his base salary and the other executive officers to hold shares of Masimo stock with a value equal to at least one time base salary by the dates specified in the policy.

~~(e) Other Benefits~~.

~~We have a retirement savings plan~~As previously noted, our Compensation Committee granted our CEO an RSU award in ~~which all~~connection with the amendment and restatement of our employees age 18 and older are entitled to participate. Employees contribute their own funds, as salary deductions, on a pre-tax basis. Contributions may be made up to plan limits, subject to government limitations. The plan permits us to make matching contributions and we have historically provided contributions that match eligible employee contributions, which contributions are generally limited to 3% of compensation (federal tax law limits the amount of employee compensation that can be taken into account for this purpose). Matching contributions vest, starting at 50% of eligible employee contributions, when an employee has been employed for two years. The vesting percentage increases to 75% of eligible employee contributions when an employee has been employed for three years and to 100% when an employee has been employed for four years.

In addition, we provide health care, dental, vision and life insurance, employee assistance plans and both short- and long-term disability, accidental death and dismemberment benefits to all full-time employees, including our executive officers. These benefits are available to all employees, subject to applicable laws. We believe these benefits are consistent with benefits of companies with which we compete for employees.

~~Under our CEO’s~~Mr. Kiani’s employment agreement ~~we reimburse Mr. Kiani~~in November 2015. This was the first RSU award granted by the Company. As previously noted, this grant was not a standalone grant but instead, was granted in consideration for ~~all reasonable travel and lodging expenses for~~the CEO’s agreement to relinquish certain rights he had under his ~~family and household members in~~prior employment agreement. The Compensation Committee’s decision to grant the event they accompany him during business travel, which includes travel and hospitality expenses for first class travel and accommodations, including travel by private or chartered aircraft. While the employment agreement also provides Mr. Kiani with tax gross-ups for these reimbursements, effectiveRSU award as part of ~~January 1, 2012, tax gross-up payments on these reimbursements have been waived by Mr. Kiani.~~

~~(f) Severance and Termination Protection~~

~~CEO Employment Agreement.~~ ~~Under his employment agreement with us, which was initially entered into in 2007, Mr. Kiani is entitled to certain severance and change in control benefits,~~ the terms of ~~which are described in detail below under “—~~the Restated CEO Employment Agreement ~~and Offer Letters.” In general,~~reflected the unanimous decision of the Compensation Committee (comprising all of the members of the Board who were independent under the relevant SEC and NASDAQ requirements) that the benefits to the stockholders from the terms of the Restated CEO Employment Agreement exceeded the contingent cost of the RSUs issued pursuant to this agreement (the RSUs only vest in the event of ~~certain terminations of Mr. Kiani’s employment or the occurrence of~~ a ~~change in control, Mr. Kiani is entitled to two times salary~~Qualifying Termination - see “—Employment Contract and ~~bonus as severance payment, and issuance of shares underlying all of his options (without payment of any exercise price and~~Severance Arrangements — Employment Agreement with ~~payment by the Company of Mr. Kiani’s tax withholding obligations) and tax gross-ups~~Joe Kiani” at page 52 for ~~certain change in control payments and benefits. (As noted above, the tax gross-up on benefits has been waived by Mr. Kiani, effective January 1, 2012.)~~

~~Severance Protection Plan~~details). The ~~Board adopted our 2007 Severance Protection Plan, which became effective on July 19, 2007 and was amended on December 31, 2008,~~decision to grant contingent RSUs in consideration of the ~~terms~~CEO’s agreement to amend his employment agreement reflected the Compensation Committee’s conclusion that providing contingent benefits in the form of ~~which are described in detail below under “—2007 Severance Protection Plan.” Under the terms of this plan, participants are entitled~~RSUs, as opposed to a contingent cash payment, ~~ranging from 12 months to two years~~further aligns the interests of ~~base salary plus bonus and other benefits upon their termination under certain circumstances. In addition, for most participants, the plan provides for equity acceleration as to 50%~~our CEO with those of ~~their awards upon~~our stockholders. The underlying philosophy reflected by this approach is that because a change in control and 100% of their awards upon a covered termination in connection with a change in control. The NEOs other than Mr. Kiani all participate in our 2007 Severance Protection Plan. See “—2007 Severance Protection Plan” below.

~~4. The Benchmarking Process~~

As described above, the Compensation Committee does not engage in formal benchmarking. Instead, in making its determinations, the Compensation Committee reviews information summarizing the compensation paid at a peer group of companies and more broad-based compensation surveys. With respect to 2013 compensation decisions, the Compensation Committee was provided with a competitive assessment of compensation levels for NEOs that was prepared by FW Cook in October 2012. The competitive market data was obtained from the SEC filings of a peer group comprisedsignificant amount of the ~~following 15 publicly-traded companies that are classified as health care equipment and supplies companies~~CEO’s contingent future compensation lies in ~~the Global Industry Classification Standard Code, the same classification as Masimo.~~



~~Align Tech.~~	~~Gen-Probe~~	~~Merit Medical Systems, Inc.~~	~~Thoratec Corporation~~
~~AngioDynamics, Inc.~~	~~Haemonetics~~	~~Natus Medical, Inc.~~	~~Volcano Corporation~~
~~ArthroCare Corporation~~	~~ICU Medical, Inc.~~	~~NuVasive, Inc.~~	~~West Pharma~~
~~Cyberonics~~	~~Integrated Lifescience~~	~~Sirons Dental~~

As of December 31, 2013, the companies included in the FW Cook report had median revenues of $476 million, ranging from $276 million to $1.368 billion, and a median market capitalization of $1.475 billion, ranging from $605 million to $4.589 billion. By way of comparison, Masimo’s revenues of $547 million and market capitalization of $1.475 billion placed it at the 56^th ~~and 58~~^th ~~percentile among the companies in the study (one company, Gen-Probe, was no longer in existence at December 31, 2013, having been acquired).~~

The Compensation Committee continues to believe that there is no single set of peer companies whose aggregate compensation statistics is relevant to all the compensation decisions of the Compensation Committee and, in 2013, the Compensation Committee did not formally adopt a single peer group of companies for compensation purposes. As a result, as stated above, the Compensation Committee considers this compensation data and weighs it to the extent the executive positions at these companies are considered comparable to Masimo positions and informative of the competitive environment.

In March 2014, FW Cook prepared another competitive study of executive compensation for the Compensation Committee. Based on a review of market data, the list of comparable companies was updated. Three companies were subtracted from the comparator companies (Angiodynamics, Gen-Probe, and Natus Medical) and six companies were added (Analogic, CONMED, Globus Medical, Greatbatch, Insulet, and Neogen).

~~5. Accounting and Tax Considerations~~

In accordance with Accounting Standards Codification (ASC) Topic 718, we expense employee stock options over the vesting period of the stock options based on the fair value of the award on the date of grant. To calculate the fair value of stock options, we use the Black-Scholes option pricing model which requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them, the estimated volatility of our stock price over the expected term and the number of options that will ultimately be forfeited prior to meeting their vesting requirements. While the Compensation Committee considers the expense impact under ASC Topic 718 as one of the factors in granting stock options, it also considers the importance of aligning NEO interests with stockholders, the retentive value of option grants and other factors and maintains the flexibility to make final stock option granting decisions based on a combination of all of these factors.

Section 162(m) of the Code limits the amount that we may deduct in a year for compensation paid to our CEO and each of our three other most highly compensated executive officers (other than our chief financial officer) to $1 million per person. Section 162(m) provides certain exceptions to this limit for certain forms of “performance-based compensation” granted under compensation plans that meet certain technical requirements. While the Compensation Committee considers the impact of Section 162(m) when making its compensation decisions, it has determined that the need for flexibility in its compensation programs outweighs the value of the ~~tax deduction for compensation that exceeds $1 million.~~RSU award, the CEO will be motivated to continually improve the Company’s performance, without encouraging unnecessary or excessive risk taking.

6. Compensation Recovery

Masimo has adopted a clawback policy ~~in accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). This policy~~that provides that in the event we are required to restate our financial statements as a result of “material noncompliance” with financial reporting requirements under the securities laws, we will recover from our current and former executive officers any incentive-based compensation (including stock option awards) that is (i) based on erroneous data, (ii) received during the three-year period preceding the date on which the Company becomes required to prepare an accounting restatement, and (iii) in excess of what would have been paid if calculated under the restatement.

~~The~~ We believe that the terms of our clawback policy comply with the statutory requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the Sarbanes-Oxley Act ~~provides that, in the event~~ of misconduct that results in a financial restatement, there is a right of recovery against the chief executive officer and chief financial officer of an issuer with respect to certain incentive compensation received or stock sale profits received during the twelve months following the inaccurate financial statement. In addition, the Dodd-Frank Act provides that SEC shall issue regulations requiring issuers to seek recovery from executive officers in certain circumstances involving financial restatements.2002, as amended. As of ~~now,~~March 16, 2016, the SEC has not issued any final regulations

implementing this portion of the Dodd-Frank Act. Once the SEC issues final regulations or guidance regarding the required form of a clawback policy under the Dodd-Frank Act, we ~~expect to~~will amend our clawback policy accordingly.

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Executive Officer Stock Ownership Policy

In January 2012, our Nominating, Compliance and Corporate Governance Committee adopted a stock ownership policy that is applicable to each of our executive officers. Our Nominating, Compliance and Corporate Governance Committee believes this policy is an important tool in aligning the interests of our executive officers with the long-term interests of our stockholders.

The policy requires that our CEO hold shares of Masimo stock with a value equal to at least six times his annual base salary and each of our other executive officers hold shares of Masimo stock with a value equal to at least one time his annual base salary. For purposes of calculating ownership under this policy, the following sources are included, whether vested or unvested: (i) shares of our common stock held directly by the executive officer or in a trust for the benefit of the executive officer or his family; (ii) shares of our common stock held by the executive officer jointly with, or separately by, the executive officer’s spouse and/or children sharing the same household as the executive officer; (iii) shares of our common stock held by the executive officer through a profit sharing, savings or deferral plan; and (iv) restricted stock or phantom stock held by the executive officer. Stock options and unearned performance shares are not included in the calculation. For purposes of these requirements, an executive officer’s base salary during any calendar year is deemed to be the executive officer’s base salary as of the close of business on December 31 of the immediately preceding year.

To give our executive officers time to comply with our stock ownership policy, our Nominating, Compliance and Corporate Governance Committee determined that our executive officers have until the later of March 2017 or March 11st of the sixth calendar year following the date an individual first becomes an executive officer to comply with these guidelines. As of January 2, 2016, excluding pledged shares, unvested options and the 2.7 million RSUs, our CEO’s stock ownership greatly exceeds this guideline at more than 138 times his base salary.

Under our stock ownership policy, if an executive officer fails to meet or, in unique circumstances, fails to show sustained progress toward meeting the ownership requirements, we may reduce future long-term incentive equity grants, and/or payments of future annual and/or long-term cash incentive payouts in the form of stock and/or impose other penalties. The Compensation Committee retains the discretion not to levy penalties for non-compliance.

Non-Employee Director Stock Ownership Policy

In February 2016, our Nominating, Compliance and Corporate Governance Committee adopted a new stock ownership policy that is applicable to each of our non-employee directors. Our Nominating, Compliance and Corporate Governance Committee believes this policy is an important tool in aligning the interests of our non-employee directors with the long-term interests of our stockholders.

The policy requires that our non-employee directors hold shares of Masimo stock with a value equal to at least $250,000. For purposes of calculating ownership under this policy, the following sources are included, whether vested or unvested: (i) shares of our common stock held directly by the non-employee director or in a trust for the benefit of the non-employee director or his family; (ii) shares of our common stock held by the non-employee director jointly with, or separately by, the non-employee director’s spouse and/or children sharing the same household as the non-employee director; (iii) shares of our common stock held by the non-employee director through a profit sharing, savings or deferral plan; and (iv) restricted stock or phantom stock held by the non-employee director. Stock options and unearned performance shares are not included in the calculation.

To give our non-employee directors time to comply with our stock ownership policy, our Nominating, Compliance and Corporate Governance Committee determined that our non-employee directors have until the later of March 1, 2021 or the five-year anniversary of their appointment as a director to comply with these guidelines.

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8. Gross-Up Policy

The Compensation Committee has adopted a policy governing gross-up provisions in agreements with our executive officers. Under this policy, the Compensation Committee will not approve any employment or other agreement or arrangement with any of our executive officers that includes a tax “gross-up” provision or a similar term that would require payments by us to an executive officer be made in the full amount, free of any deductions or withholdings, and without exercising any right of set-off, in connection with a change in control. This policy also provides that the Compensation Committee will not approve an amendment to extend the term of any current employment or other agreement or arrangement between us and any executive officer if such agreement or arrangements includes a tax “gross-up” provision or a similar term. ~~Notwithstanding the foregoing, this policy provides that the provisions in~~Although Mr. Kiani’s prior employment agreement ~~requiring us to pay Mr. Kiani~~provided for a gross-up ~~or similar payment to cover Mr. Kiani’s tax obligations, if any, with respect to “parachute payments,” and~~provision, the issuance of shares, if any, to Mr. Kiani as severance under his agreement, will continue and will not be deemed modified, impaired, limited or amended in any respect by this policy. For a detailed description of our employment agreement with Mr. Kiani, see “Employment Agreement and Offer Letters—Restated CEO Employment Agreement does not include any gross-up provisions, and there are no agreements in place with ~~Joe Kiani” below.~~any other executive officer that require a gross-up payment.

Under our Severance Plan in which our other NEOs ~~(other than our CEO)~~ participate, the Plan Administrator has the right to reduce any change in control severance benefits payable to an executive to avoid triggering any “excess parachute payments” under Section 280G of the Code.

9.Accounting and Tax Considerations

We expense employee and non-employee director equity awards in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 718. Pursuant to ASC Topic 718, employee stock options are expensed over the vesting period of the stock options based on the fair value of the award on the date of grant. To calculate the fair value of stock options, we use the Black-Scholes option pricing model which requires the input of subjective assumptions. These assumptions include estimating the length of time employees will retain their vested stock options before exercising them, the estimated volatility of our stock price over the expected term and the number of options that will ultimately be forfeited prior to meeting their vesting requirements. RSUs are expensed based on the fair value of the award on the date of grant, which is calculated based upon the closing stock price of our common stock on the date of the grant. Time-based awards are expensed over the requisite service period of each award, which is the vesting period, using the straight-line attribution method. While the Compensation ~~Policies and Practices~~

~~Our compensation program is intended to reward~~Committee considers the ~~management team~~expense impact under ASC Topic 718 as one of the factors in granting equity awards, it also considers the importance of aligning NEO interests with stockholders, the retentive value of equity awards and other ~~employees~~factors, and makes its decisions regarding equity awards based on a combination of these factors.

With regard to the 2.7 million RSU grant provided to our CEO as part of the terms of the Restated CEO Employment Agreement, this RSU grant vests only in the event of a Qualifying Termination (see “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” at page 52 for ~~strong performance over~~details). Accordingly, and in accordance with GAAP, the ~~long-term,~~Company will only recognize an expense related to this contingent RSU grant at the time of a change of control or when it is determined that the occurrence of a Qualifying Termination is “probable”. Should this occur, in accordance with ~~consideration~~GAAP, the amount of expense that will be recognized will be based upon the fair market value of the RSU on the date of grant. At the current time, the Company does not believe that an occurrence of a Qualifying Termination is “probable”, and as a result, no stock-based compensation expense has been recorded related to ~~near-term actions~~this RSU grant.

Section 162(m) of the Code limits the amount that we may deduct in a year for compensation paid to our CEO and ~~results~~each of our three other most highly compensated executive officers (other than our chief financial officer) to $1 million per person. Section 162(m) provides certain exceptions to this limit for certain forms of “performance-based compensation” granted under compensation plans that ~~strengthen~~meet certain technical requirements. The Compensation Committee considers the impact of Section 162(m) when making its compensation decisions, but has determined that it will approve compensation arrangements that do not qualify for tax deductions when, in its business judgment, doing so would be in the best interest of the Company and protect Masimo. We consider the potential risks in our business when designing and administering our pay program, and we believe our balanced approach to performance measurement and pay delivery works to avoid misaligned incentives for individuals to undertake excessive or inappropriate risk. Further, program administration is subject to internal controls, and when determining the principal outcomes—performance assessments and pay decisions—we seek to rely on principles of sound governance and good business judgment.its stockholders.

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Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K of the SEC’s rules and regulations with management and, based on such review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the fiscal year ended January 2, 2016.



	Compensation Committee
	Mr. Craig Reynolds
	Mr. Sanford Fitch
	Mr. Thomas Harkin
	Mr. Jack Lasersohn

This foregoing compensation committee report is not “soliciting material”, is not deemed “filed” with the SEC, and shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing of ours under the Securities Act of 1933, as amended, or under the Exchange Act, except to the extent we specifically incorporate this report by reference.

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Compensation Committee Interlocks and Insider Participation

During fiscal 2015, our Compensation Committee consisted of Mr. Lasersohn, Mr. Reynolds, Mr. Fitch (appointed on February 26, 2015), and Mr. Harkin (appointed on December 16, 2015). In addition, Dr. Robert L. Coleman served on our Compensation Committee during fiscal 2015 until his service on our Board ceased on June 2, 2015. There are no relationships between the current members of the Compensation Committee and our executive officers of the type contemplated in the SEC’s rules requiring disclosure of “compensation committee interlocks.” None of the current members of the Compensation Committee is our employee and no current member has been an officer of Masimo at any time.

Cercacor Laboratories, Inc. (Cercacor)

Cercacor is an independent entity spun off from us to our stockholders in 1998. Joe Kiani, our Chairman and Chief Executive Officer, is also the Chairman and Chief Executive Officer of Cercacor and a member of the board of directors of Cercacor. In addition, Mr. Lasersohn, a member of our Board, also served as a member of the board of directors of Cercacor through April 2, 2015.

We are a party to a cross-licensing agreement with Cercacor, which was amended and restated effective January 1, 2007 (the “Cross-Licensing Agreement”), that governs each party’s rights to certain of the intellectual property held by the two companies. To date, the Company has developed and commercially released devices that measure carbon monoxide, methemoglobin and hemoglobin using licensed rainbow^®technology. Pursuant to the Cross-Licensing Agreement, we are currently subject to certain specific minimum royalty payment obligations of $5.0 million per year. Actual aggregate royalty payment liabilities were $6.7 million for fiscal 2015.

The Company has also entered into a Services Agreement with Cercacor effective January 1, 2007, which governs certain general and administrative services the Company provides to Cercacor. Pursuant to the Services Agreement, Cercacor paid the Company $0.2 million for general and administrative services related to fiscal 2015.

In addition, to accelerate the development of the technology and product development supporting our Pronto-7^® device, in February 2009, Masimo agreed to reimburse Cercacor for all third-party engineering materials and supplies expenses related to Pronto-7^® development and 50% of Cercacor’s total engineering and engineering-related payroll expenses and this arrangement was discontinued by mutual agreement effective January 4, 2015. During fiscal 2015, Cercacor completed a review of its fiscal 2014 cross-charges related to Pronto-7^®. Based on this review, it was determined that less than 60% of Cercacor’s total engineering and engineering-related payroll expenses were attributable to the development of Pronto-7^®, resulting in an overpayment by us to Cercacor of approximately $1.6 million for fiscal 2014. In addition, in fiscal 2015, we and Cercacor agreed to equally share approximately $1.4 million of previously incurred engineering-related payroll expenses associated with research for a new LED sensor technology and, as a result, we and Cercacor mutually agreed that Cercacor would refund $0.9 million to us.

During fiscal 2015, we also agreed to compensate Cercacor for certain engineering consulting and clinical studies support services that Cercacor may provide to the Company from time-to-time. Expenses incurred by the Company for such services were $0.3 million for the fiscal year ended January 2, 2016.

We also entered into a patent transfer and licensing agreement (the “Patent Agreement”) with Cercacor during fiscal 2015, pursuant to which, among other things, we purchased certain patents from Cercacor (the “Purchased Patents”) for an aggregate purchase price of $2.4 million. Pursuant to the Patent Agreement, the Company granted Cercacor an irrevocable, non-exclusive, worldwide license with respect to the products and services covered by the Purchased Patents.

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Summary Compensation Table

The following table provides information regarding the compensation earned during the fiscal year ended ~~December 28, 2013~~January 2, 2016 by our ~~chief executive officer,~~CEO, our ~~chief financial officer,~~CFO, and our three other most highly compensated executive officers who were employed with us as of ~~December 28, 2013,~~January 2, 2016, the last day of our ~~2013~~2015 fiscal year. We refer to these five individuals collectively as our “named executive officers” ~~or “NEOs.”~~(“NEOs”). We generally pay bonuses in the year following the year in which the bonus was earned.


Name and Principal Position(s)	Year	Salary		Option Awards⁽¹⁾		Non-Equity Incentive Plan Compensation⁽²⁾		All Other Compensation			Total		Year	Salary		Bonus		Stock Awards⁽¹⁾			Option Awards⁽¹⁾		Non-Equity Incentive Plan Compensation⁽²⁾		All Other Compensation			Total		Total, Excluding RSU Grant to Mr. Kiani in Connection with the Restated CEO Employment Agreement⁽³⁾
Joe Kiani	2013	$	712,545	$	2,320,110	$	712,545	$	239,261	⁽³⁾	$	3,984,461	2015	$	883,518	$	—	$	111,915,000	⁽⁴⁾	$	3,822,690	$	1,050,000	$	1,551,406	⁽⁵⁾	$	119,222,614	$	7,307,614
Chief Executive Officer and Chairman (PEO)	2012	739,125		—		547,835		11,681			1,298,641		2014	755,846		75,000					2,661,150		769,549		194,836			4,456,381		4,456,381
	2011	717,679		5,967,180		356,050		185,738			7,226,647		2013	712,545		—					2,320,110		787,545		387,288			4,207,488		4,207,488

Mark P. de Raad	2013	334,442		232,011		142,138		5,788		⁽⁴⁾	714,379
Mark de Raad													2015	363,034		—					313,623		204,750		7,950		⁽⁶⁾	889,357		889,357
Executive Vice President, Chief Financial Officer & Corporate Secretary (PFO)	2012	329,571		—		92,825		7,500			429,896		2014	346,082		—					266,115		172,237		7,500			791,934		791,934
	2011	320,008		596,718		75,940		7,350			1,000,016		2013	334,442		—					232,011		142,138		5,788			714,379		714,379

Jon Coleman	2013	332,410		232,011		141,274		5,753		⁽⁵⁾	711,448
President, Worldwide Sales, Marketing and Clinical Research	2012	329,151		—		82,549		7,500			419,200
Anand Sampath													2015	369,277		—					313,623		220,500		7,950		⁽⁶⁾	911,350		911,350
Chief Operating Officer													2014	307,815		—					605,780		172,520		7,500			1,093,615		1,093,615
	2011	319,951		538,375		68,661		7,350			934,337		2013	257,396		—					232,011		128,660		6,235			624,302		624,302

Rick Fishel	2013	335,669		232,011		142,659		11,809		⁽⁶⁾	722,148		2015	357,574		—					313,623		186,958		16,350		⁽⁷⁾	874,505		874,505
President, Worldwide OEM Business & Corporate Development	2012	330,780		—		88,262		13,500			432,542
President, Worldwide OEM Business & Strategic Development													2014	347,352		—					266,115		155,582		15,900			784,949		784,949
	2011	322,031		596,718		75,178		13,350			1,007,277		2013	335,669		—					232,011		142,659		11,809			722,148		722,148

Yongsam Lee	2013	329,244		232,011		139,929		6,078		⁽⁷⁾	707,262
Chief Information Officer & Executive Vice President, Operations & Regulatory Affairs	2012	324,450		—		91,382		7,500			423,332
Jon Coleman													2015	354,103		—					313,623		194,400		7,950		⁽⁶⁾	870,076		870,076
President, Worldwide Sales, Professional Services & Medical Affairs													2014	343,980		—					266,115		145,512		7,500			763,107		763,107
	2011	315,035		596,718		73,931		7,350			993,034		2013	332,410		—					232,011		141,274		5,753			711,448		711,448

~~__________________~~

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___________

⁽¹⁾

Amounts set forth in the “Stock Awards” and “Option Awards” ~~column~~columns for ~~2011, 2012~~2013, 2014 and ~~2013~~2015 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 ~~these~~the option awards and do not necessarily correspond to the actual value that will be recognized by the ~~named executive officers.~~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 1214 of the Notes to Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended ~~December 28, 2013~~January 2, 2016 filed with the SEC on February ~~14, 2014,~~24, 2016, 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 ~~2011, 2012~~2013, 2014 and ~~2013.~~

2015.


⁽²⁾	All amounts were paid pursuant to the Executive Annual 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. 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 Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement for additional information regarding the restricted share unit award.

⁽⁴⁾

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. 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 Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement for additional information regarding the restricted share unit award.

⁽⁵⁾

Consists of ~~$4,712~~$7,500 in retirement savings plan matching contributions, ~~and $234,549~~$107,890 for the net incremental costs of certain ~~travel~~lodging, meals and other travel-related expenses incurred by Mr. Kiani’s family and household members accompanying him toduring certain business ~~meetings. Under~~travel pursuant to Mr. Kiani’s employment agreement ~~we reimburse~~(see “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement), $44,213 for the net incremental costs of security personnel and security services provided to Mr. Kiani ~~for all reasonable expenses incurred and~~during certain personal, non-business-related occasions, which represents the actual amounts paid by ~~him~~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 and $1,391,803 for Mr. Kiani’s legal expenses that were paid by the Company in connection with our negotiation of his Restated CEO Employment Agreement (see “— Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani” on page 52 of this Proxy Statement). 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 ~~course~~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. In addition, as part of the ~~performance~~Compensation Committee’s request that Mr. Kiani engage in discussions to amend his prior employment agreement, Mr. Kiani’s legal costs were paid on his behalf by the Company. We do not consider such legal costs to be personal benefits as these costs were incurred as a result of ~~his duties under~~ the ~~agreement and we further reimburse him for all reasonable travel and lodging expenses for his family and household members in the event they accompany him~~Compensation Committee’s request.

during business travel, which includes travel and hospitality expenses for first class airplane travel and accommodations and expenses for travel using private or chartered aircraft. In addition, under the agreement as in effect for 2011, Mr. Kiani was entitled to receive an additional payment equal to, after taxes, the amount of the federal and state taxes incurred by him pursuant to the expense reimbursement he received for the immediately preceding year under our reimbursement policy, which was waived by Mr. Kiani for 2012 and 2013. See “Employment Agreement and Offer Letters—Employment Agreement with Joe Kiani” below.


⁽⁴⁾⁽⁶⁾	Consists of ~~$5,788~~$7,950 in retirement savings plan matching contributions.


⁽⁵⁾⁽⁷⁾	Consists of ~~$5,753~~$8,400 in automobile allowances and $7,950 in retirement savings plan matching contributions.


⁽⁶⁾	~~Consists of $5,809 in retirement savings plan matching contributions and $6,000 in automobile allowances.~~


⁽⁷⁾	~~Consists of $6,078 in retirement savings plan matching contributions.~~

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Pension Benefits-Nonqualified Defined Contribution and Other Nonqualified Deferred Compensation

No pension benefits were paid to any of our NEOs during fiscal 2015. We do not currently sponsor any non-qualified defined contribution plans or non-qualified deferred compensation plans.

Grants of Plan-Based Awards During Fiscal Year ~~2013~~2015


	Estimated Future Payout Under Non-Equity Incentive Plan Awards					All Other Stock Awards: Number of Shares of Stock or Units (#)	Exercise Price Per Share ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)⁽²⁾	Estimated Future Payout Under Non-Equity Incentive Plan Awards⁽¹⁾					All Other Stock Awards: Number of Shares of Stock or Units (#)	Exercise Price Per Share ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($)⁽³⁾
Named Executive Officer	Grant Date	Threshold	Target⁽¹⁾		Maximum		Exercise Price Per Share ($/Sh)	Grant Date Fair Value of Stock and Option Awards ($)⁽²⁾	Grant Date	Threshold	Target⁽²⁾		Maximum		Exercise Price Per Share ($/Sh)		Grant Date Fair Value of Stock and Option Awards ($)⁽³⁾
Joe Kiani	May 28, 2013	Note⁽¹⁾	$	712,545	Note⁽¹⁾				February 6, 2015	Note⁽²⁾	$	1,000,000	Note⁽²⁾
	May 28, 2013	—	—		—	300,000⁽³⁾	$21.97	$2,320,110	June 15, 2015	—	—		—	300,000⁽⁴⁾	$	38.76	$	3,822,690
Mark P. de Raad	May 28, 2013	Note⁽¹⁾	$	167,221	Note⁽¹⁾
									November 4, 2015	—	—		—	2,700,000⁽⁵⁾			111,915,000

Mark de Raad									February 6, 2015	Note⁽²⁾	195,000		Note⁽²⁾
									March 20, 2015	—	—		—	30,000⁽⁴⁾	$	31.01	313,623

Anand Sampath									February 6, 2015	Note⁽²⁾	210,000		Note⁽²⁾
									March 20, 2015	—	—		—	30,000⁽⁴⁾	$	31.01	313,623

Rick Fishel									February 6, 2015	Note⁽²⁾	178,056		Note⁽²⁾
									March 20, 2015	—	—		—	30,000⁽⁴⁾	$	31.01	313,623
	May 28, 2013	—	—		—	30,000⁽³⁾	$21.97	$232,011
Jon Coleman	May 28, 2013	Note⁽¹⁾	$	166,205	Note⁽¹⁾				February 6, 2015	Note⁽²⁾	176,327		Note⁽²⁾
	May 28, 2013	—	—		—	30,000⁽³⁾	$21.97	$232,011	March 20, 2015	—	—		—	30,000⁽⁴⁾	$	31.01	313,623
Rick Fishel	May 28, 2013	Note⁽¹⁾	$	167,834	Note⁽¹⁾
	May 28, 2013	—	—		—	30,000⁽³⁾	$21.97	$232,011
Yongsam Lee	May 28, 2013	Note⁽¹⁾	$	164,622	Note⁽¹⁾
	May 28, 2013	—	—		—	30,000⁽³⁾	$21.97	$232,011



⁽⁵⁾ Current Directors	~~Assumes that Mr. Fishel does not commence employment with another employer during the period from December 29, 2013 through January 3, 2015.~~

	Class and Remaining Term in Office
⁽⁶⁾ Steven J. Barker, M.D, Ph.D.	~~Comprised~~	Class I - Continuing in Office Until the 2017 Annual Meeting of ~~COBRA benefits for Mr. Fishel and his dependent for 12 months.~~

	the Stockholders
⁽⁷⁾ Sanford Fitch	~~Comprised~~	Class I - Continuing in Office Until the 2017 Annual Meeting of ~~COBRA benefits for Mr. Fishel and his dependent for 12 months and life insurance for Mr. Fishel for 12 months.~~

~~Yongsam Lee~~

Termination
Executive Benefits, Payments
and Acceleration of Vesting of Options

By Masimo
Without
Cause Outside
a Change In
Control

By Masimo
Without Cause or
by Mr. Lee for
Good Reason in
Connection with
a Change In
Control

Change In
Control

Number of Option Shares Accelerated —

84,000

42,000

Value of Option Shares Accelerated $ —

$ 411,360
⁽¹⁾
$ 205,680
⁽²⁾
Cash Payments $ 329,244

$ 747,109

$ —

Continuation of Benefits⁽³⁾
$ 18,287
⁽⁴⁾
$ 23,042
⁽⁵⁾
$ —

Total Cash Benefits and Payments $ 347,531
   $ 1,181,511
   $ 205,680

~~__________________~~

	the Stockholders
⁽¹⁾ Joe Kiani	~~Includes only~~	Class II - Continuing in Office Until the ~~value~~2018 Annual Meeting of the ~~accelerated in-the-money stock options held by Mr. Lee as of December 28, 2013. Excludes 18,000 out-of-the-money stock options held by Mr. Lee as of December 28, 2013.~~

	Stockholders
⁽²⁾ Thomas Harkin	~~Includes only~~	Class II - Continuing in Office Until the ~~value~~2018 Annual Meeting of the ~~accelerated in-the-money stock options held by Mr. Lee as of December 28, 2013. Excludes 9,000 out-of-the-money stock options held by Mr. Lee as of December 28, 2013.~~Stockholders


⁽³⁾	~~Assumes that Mr. Lee does not commence employment with another employer during the period from December 29, 2013 through January 3, 2015.~~


⁽⁴⁾	~~Comprised of COBRA benefits for Mr. Lee and his dependents for 12 months.~~


⁽⁵⁾	~~Comprised of COBRA benefits for Mr. Lee and his dependents for 12 months and life insurance for Mr. Lee for 12 months.~~

~~SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT~~

~~The following table sets forth information as of March 14, 2014, with respect to the beneficial ownership of shares of our common stock by:~~

~~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.~~

This table is based upon information supplied by officers, directors and principal stockholders and a review of Schedules 13D and 13G, if any, filed with the SEC. Other than as set forth below, we are not aware of any other beneficial owner of more than five percent of our common stock as of March 14, 2014. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership is based on 54,724,112 shares of common stock outstanding as of March 14, 2014, adjusted as required by rules promulgated by the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on or before May 13, 2014, which is 60 days after March 14, 2014. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

~~Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Masimo Corporation, 40 Parker, Irvine, California 92618.~~

Beneficial Ownership of
Common Stock
Name of Beneficial Owner
Number of
Shares

Percent of
Class⁽¹⁾
Named Executive Officers and Directors:
Joe Kiani⁽²⁾
6,400,114
11.0 %
Mark P. de Raad⁽³⁾
296,660
*
Jon Coleman⁽⁴⁾
167,430
*
Rick Fishel⁽⁵⁾
221,362
*
Yongsam Lee⁽⁶⁾
279,000
*
Steven J. Barker, Ph.D., M.D.⁽⁷⁾
186,000
*
Edward L. Cahill⁽⁸⁾
91,000
*
Robert Coleman, Ph.D.⁽⁹⁾
186,200
*
Sanford Fitch⁽¹⁰⁾
138,000
*
Jack Lasersohn⁽¹¹⁾
87,000
*
Craig Reynolds —
*
Total Shares Held By Current Executive Officers and Directors (14 persons)⁽¹²⁾
8,354,766
14.0 %
5% Stockholders:
Joe Kiani⁽²⁾
6,400,114
11.0 %
BlackRock, Inc.⁽¹³⁾
4,230,231
7.5 %
Janus Capital Management LLC⁽¹⁴⁾
5,454,141
9.6 %
The Vanguard Group⁽¹⁵⁾
3,095,135
5.5 %
FMR, LLC⁽¹⁶⁾
5,705,773
10.1 %

~~__________________~~


*	~~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 14, 2014,

~~plus the number of shares of common stock that such person or group had the right to acquire within 60 days after March 14, 2014.~~

⁽²⁾

Comprised of 719,241 shares held directly, 3,982,500 shares held in three trusts for which Mr. Kiani is the sole trustee, 359,000 shares held in one trust for which the reporting person is not the trustee, 9,000 shares held by an immediate family member of Mr. Kiani, 10,373 shares held for Mr. Kiani’s account under our Retirement Savings Plan and options to purchase 1,320,000 shares of common stock that are exercisable within 60 days after March 14, 2014. As of March 14, 2014, 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 “Hedging and Pledging Policies” above.


⁽³⁾	Comprised of 2,660 shares held for Mr. de Raad’s account under our Retirement Savings Plan and options to purchase 294,000 shares of common stock that are exercisable within 60 days after March 14, 2014.


⁽⁴⁾	Comprised of 430 shares of common stock held for Mr. Coleman’s account under our Retirement Savings Plan and options to purchase 167,000 shares of common stock that are exercisable within 60 days after March 14, 2014.


⁽⁵⁾	~~Comprised of 15,000 shares of common stock held directly and options to purchase 206,362 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽⁶⁾	~~Comprised of 69,000 shares of common stock held directly and options to purchase 210,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽⁷⁾	~~Comprised of 20,000 shares of common stock held directly and options to purchase 166,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽⁸⁾	~~Comprised of 35,000 shares of common stock held directly and options to purchase 56,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽⁹⁾	~~Comprised of 70,200 shares of common stock held directly and options to purchase 116,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽¹⁰⁾	~~Comprised of 41,000 shares of common stock held directly and options to purchase 97,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽¹¹⁾	~~Comprised of 1,000 shares of common stock held directly and options to purchase 86,000 shares of common stock that are exercisable within 60 days after March 14, 2014.~~


⁽¹²⁾	Comprised of shares included under “Named Executive Officers and Directors,” and options to purchase an aggregate of 302,000 shares of common stock held by three of our other executive officers that are exercisable within 60 days after March 14, 2014.


⁽¹³⁾	BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on January 30, 2014, reporting that it had sole dispositive power with respect to an aggregate of 4,230,231 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 40 East 52nd Street, New York, New York 10022.

⁽¹⁴⁾

Janus Capital Management LLC (“Janus”) filed a Schedule 13G/A on February 14, 2014, reporting that it had sole voting and dispositive power with respect to an aggregate of 5,454,141 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.

⁽¹⁵⁾

The Vanguard Group (“Vanguard”) filed a Schedule 13G on February 11, 2014, reporting that it had sole voting power with respect to 3,025,056 shares and shared dispositive power with respect to 70,079 shares, for an aggregate total of 3,095,135 shares in its capacity as an investment adviser in accordance with Rule 13d-1(b)(1)(ii)(E) under the Exchange Act. Vanguards’ address is 100 Vanguard Blvd., Malvern, PA 19355.

⁽¹⁶⁾

The FMR LLC (“FMR”) filed a Schedule 13G/A on March 10, 2014, reporting that it had sole dispositive power with respect to 5,705,773 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. FMR LLC's address is 245 Summer Street, Boston, MA 02210.

~~Securities Authorized for Issuance Under Equity Compensation Plans~~

The following table sets forth additional information as of December 28, 2013 with respect to the shares of common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements in effect as of December 28, 2013. The information includes the number of shares covered by, and the weighted average exercise price of, outstanding options and the number of shares remaining available for future grant, excluding the shares to be issued upon exercise of outstanding options.

~~Equity Compensation Plan Information~~

Plan Category
Number of securities
to be issued upon exercise of
outstanding options,
warrants and rights (a)

Weighted-average exercise price
of outstanding options,
warrants and rights

Number of securities
remaining
available for future issuance under equity
compensation plans
(excluding securities reflected in column (a))

Equity compensation plans approved by security holders⁽¹⁾
8,910,729
$ 22.76
5,531,970
⁽²⁾
Equity compensation plans not approved by security holders⁽³⁾
—
—
—

Total 8,910,729
$ 22.76
5,531,970

~~__________________~~


⁽¹⁾	Comprised of the Third Amended and Restated 1996 Incentive Stock Option Nonqualified Stock Option and Restricted Stock Purchase Plan, the 2004 Incentive Stock Option Nonqualified Stock Option and Restricted Stock Purchase Plan and the 2007 Stock Incentive Plan (the “2007 Plan”).

⁽²⁾

Comprised solely of shares subject to awards 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 28, 2013, we did not have any equity compensation plans that were not approved by our stockholders.~~

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PROPOSAL NO. 2

RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

The Audit Committee of our Board has selected Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for the fiscal year ending ~~January 3, 2015,~~December 31, 2016, and has further directed that management submit the selection of our independent registered public accounting firm for ratification by the stockholders at the Annual Meeting.

Grant Thornton was appointed as our independent registered public accounting firm in July 2006 and has reported on our consolidated financial statements for years ~~2005-2014.~~2005-2016. The decision to select Grant Thornton as our independent registered public accounting firm for fiscal year ~~2014~~2016 (ending ~~January 3, 2015)~~December 31, 2016) was recommended by our Audit Committee and approved by our Board.

Representatives of Grant Thornton are expected to be present at the Annual Meeting. The representatives of Grant Thornton will be able to make a statement at the meeting if they wish and will be available to respond to appropriate questions.

Neither our Bylaws nor other governing documents or law require that our stockholders ratify the selection of Grant Thornton as our independent registered public accounting firm. However, the Audit Committee is submitting the selection of Grant Thornton to the stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of different independent registered public accounting firms at any time during the year if it determines that such a change would be in the best interests of Masimo and our stockholders.

Although our stockholders are not required to ratify the selection of Grant Thornton as our independent registered public accounting firm, because we have submitted the ratification of our registered public accounting firm for approval by stockholders, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy and voting at the Annual Meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) will be required to ratify the selection of Grant Thornton as our independent registered public accounting firm for the fiscal year ending ~~January 3, 2015.~~December 31, 2016.

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

OUR FISCAL YEAR ENDING DECEMBER 31, 2016.

~~JANUARY 3, 2015.~~

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~~Principal Accountant Fees and Services~~

The following table represents aggregate fees billed to Masimo for the fiscal years ended December 28, 2013 and December 29, 2012 by Grant Thornton, our independent registered public accounting firm for such periods. All fees described below were approved by the Audit Committee.Table of Contents

Fiscal Year Ended
December 28,
2013 December 29,
2012
Audit Fees⁽¹⁾
$ 1,444,839
$ 1,069,460
Audit-Related Fees⁽²⁾
48,600
106,317
Tax Fees⁽³⁾
203,722
176,827
All Other Fees —
—
Total Fees $ 1,697,161
$ 1,352,604

~~__________________~~

⁽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 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 28, 2013, these services included fees primarily for the audit of our retirement savings plan. For the fiscal year ended December 29, 2012, these services included fees primarily for the audit of our retirement savings plan and consultation services on various accounting issues related to our acquisitions.


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

~~Audit Committee’s Pre-Approval Policies and Procedures~~

The Audit Committee has adopted a policy for the pre-approval of audit and non-audit services rendered by our independent registered public accounting firm, Grant Thornton. The policy generally pre-approves specified services in the defined categories of audit services, audit-related services and tax services up to specified amounts. Pre-approval may also be given as part of the Audit Committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual explicit case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The pre-approval of services may be delegated to one or more of the Audit Committee’s members, but the decision must be reported to the full Audit Committee at its next scheduled meeting. By the adoption of this policy, the Audit Committee has delegated the authority to pre-approve services to the Chairperson of the Audit Committee, subject to certain limitations.

The Audit Committee has determined that the rendering of the services other than audit services by Grant Thornton is compatible with maintaining the independent registered public accounting firm's independence.

PROPOSAL NO. 3

ADVISORY VOTE TO APPROVE THE COMPENSATION OF

OUR NAMED EXECUTIVE

OFFICERS

In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), we are providing our stockholders the opportunity to vote on a non-binding, advisory resolution to approve the compensation of our named executive officers, which is described in this Proxy Statement in the section titled “Compensation Discussion and Analysis” beginning on page ~~22,~~24 of this Proxy Statement, and the compensation tables beginning on page ~~35,~~46 of this Proxy Statement, and any related narrative discussion contained in this Proxy Statement.

Masimo demonstrated many important financial achievements during fiscal ~~year 2013~~2015 including an increase of ~~11.3%~~7.6% in ~~overall~~ product revenues, ~~significant rainbow revenue~~or 11.0% growth ~~of 21.3% and~~on a ~~notable and encouraging~~constant currency basis¹², while GAAP earnings per share rose from $1.30 to $1.55, an increase of ~~15%~~19.2%. On a constant currency basis, Masimo’s 2015 adjusted earnings per share¹³ were $1.69, resulting in ~~total~~a 30% increase over the prior year ~~over year OEM board~~period. In addition to these key top and bottom line financial metrics, Masimo ~~device unit shipments. In 2013,~~exceeded its operational goals including the ~~Company was able to successfully complete the integration~~number of ~~its 2012 acquisitions. In the case~~drivers and sensors shipped as well as rainbow^® revenues. Throughout 2015, as part of our ~~Phasein acquisition, an earlier than anticipated~~foundation for 2016 and successful transition into our existing worldwide sales organization led to higher year over year growth rates than expected. At the same time, our Masimo Semiconductor acquisition and integration also progressed faster than expected and, as a result, we anticipate receiving new, higher efficiency and lower cost sensors later in 2014. Finally, throughout 2013,beyond, we continued to introduce a variety of exciting new technologies, including both new and redesigned products, which we believe will ~~continue to~~ allow Masimo to ~~be able~~continue to grow and expand our ~~growing~~ worldwide ~~presence~~presence.

Based on our strong 2015 financial performance, Masimo achieved ratings of 87% or above on four out of six key metrics, including two metrics, earnings per share growth and return on equity, in which Masimo achieved the top rating of 100%, as compared to the ~~result~~reported results for a group of ~~our continuing ability~~other comparable companies¹⁴. During the year, the Company also prudently utilized its cash and some incremental borrowings to ~~introduce new technologies~~repurchase a total of approximately 4.1 million shares for approximately $155.0 million. This resulted in the Company having now returned approximately 135.7% of its fiscal 2015 cash generated from business operations to stockholders and, ~~products.~~

~~For fiscal year 2013, our total stockholder return, measured as~~over the ~~increase in our~~last five years, the Company has returned approximately 106.2% of its cash generated from business operations to stockholders through a combination of dividends and stock ~~price, was 40.2%. In addition, our Return on Equity, measured by net income divided by the average stockholders’ equity, continued to be very strong at 19.5% in 2013.~~ repurchases.

Our compensation decisions for ~~2013~~2015 were based on the financial and operational goals that we had established at the start of the year. Our strong fiscal ~~year 2013~~2015 product revenue and earnings per share results ~~(excluding certain fourth quarter special charges),~~ yielded a ~~100%~~combined Company and individual payout percentage of 105% for the CEO and ~~an 85%~~combined payout ~~percentage~~percentages of 105%-110% for ~~the~~our other NEOs. Separately, during 2013, it is noteworthy that Mr. Kiani continued to waive his gross-up provision on his travel reimbursement costs as provided in his employment agreement and that he voluntarily requested, and the Board agreed, to temporarily reduce his base salary by 5%.

In ~~September 2012,~~addition to reporting strong fiscal 2015 financial results, we entered into the Restated CEO Employment Agreement with our CEO, Joe Kiani, a significant achievement by the Compensation Committee ~~retained~~during fiscal 2015. Historically, proxy advisory organizations and certain stockholders had expressed concern over various elements of the ~~services~~prior CEO employment agreement. After nearly three years of ~~FW Cook, a~~active review, including the involvement of nationally recognized ~~independent~~law firms and our executive compensation consulting firm, to advise it on, among other things: (i) say-on-pay voting considerations; (ii) CEO compensation analysis; (iii) pay for performance analysis; and (iv) long-term incentive alternatives. Theconsultant, the Compensation Committee ~~continues~~and our CEO executed the Restated CEO Employment Agreement, which was estimated to ~~work~~yield potential savings to the Company in excess of $52 million had a Qualifying Termination occurred as of December 31, 2015, and as outlined in the Company’s Current Report on Form 8-K filed by the Company with ~~FW Cook~~the SEC on November 5, 2015 at 4:45 p.m. Eastern Time, over $100 million (assuming various stock prices) had a Qualifying Termination occurred as of December 31, 2017. Specifically, the ~~Compensation Committee’s evaluation~~Restated CEO Employment Agreement:

eliminated certain provisions of Mr. Kiani’s previous employment agreement, including the elimination of tax gross-up payments, single trigger payments upon a change in control and certain survival provisions;

phased out Mr. Kiani’s right to a 300,000 share annual equity grant so that there are no guaranteed grants of stock options or any other type of equity to Mr. Kiani after fiscal 2017; and

¹² Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

¹³ Non-GAAP financial measure - please see reconciliation to GAAP amounts in Appendix A to this Proxy Statement.

¹⁴ Since 2015 data was not available for all companies, these ~~and other compensation related topics~~ratings are based on reported results for the for the four fiscal quarters ended nearest to ~~serve~~September 30, 2015

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provided for the ~~best interests~~delivery of most of the ~~Company~~potential termination benefits through Masimo equity instead of cash.

A complete summary and ~~its stockholders. See~~discussion of the provisions contained within the Restated Employee Agreement can be found on page 2452 of this Proxy Statement under “Executive Compensation — Employment Contract and Severance Arrangements — Employment Agreement with Joe Kiani”.

In addition to the new CEO Employment Agreement, the Board made other important governance changes during the year and through the early part of 2016. These steps included eliminating our stockholder rights plan (poison pill), establishing a 15 year term limit for ~~further discussion of some of the steps being taken by the Compensation Committee to address stockholder concerns over executive compensation.~~directors and creating a non-employee director stock ownership requirement.

As a result of these factors, the Compensation Committee believes that the compensation plans and objectives are appropriately incentivizing the members of the executive management team and that the plans in place will be sufficient to continue to incentivize the entire management team going forward. Stockholders are urged to read the “Compensation Discussion and Analysis” section of this Proxy Statement, which more thoroughly discusses how our compensation policies and procedures implement our compensation philosophy. The Compensation Committee and the Board believe that these policies and procedures are effective in implementing our compensation philosophy and in achieving its goals.

In light of the above, we believe that the compensation of our named executive officers for fiscal ~~2013~~2015 was appropriate and reasonable and reflected ~~our~~the Company’s performance for the year.

Accordingly, the following resolution will be submitted for a stockholder vote at the Annual Meeting:

“RESOLVED, that the stockholders of Masimo Corporation approve, on an advisory basis, our named executive officer compensation, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, in this Proxy Statement.”

While this stockholder vote on executive compensation is merely advisory and will not be binding upon us or the Board or our Compensation Committee, we value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions.

THE BOARD OF DIRECTORS RECOMMENDS

A VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS

DESCRIBED IN THIS PROXY STATEMENT

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT

The following table sets forth information as of March 7, 2016, with respect to the beneficial ownership of shares of our common stock by:

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.

This table is based upon information supplied by officers, directors and principal stockholders and a review of Schedules 13D and 13G, if any, filed with the SEC. Other than as set forth below, we are not aware of any other beneficial owner of more than five percent of our common stock as of March 7, 2016. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect to all shares of common stock that they beneficially own, subject to applicable community property laws.

Applicable percentage ownership is based on 49,540,301 shares of common stock outstanding as of March 7, 2016, adjusted as required by rules promulgated by the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options that are either immediately exercisable or exercisable on or before May 6, 2016, which is 60 days after March 7, 2016. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Masimo Corporation, 52 Discovery, Irvine, California 92618.



	Beneficial Ownership of Common Stock
Name of Beneficial Owner	Number of Shares	Percent of Class⁽¹⁾
Named Executive Officers and Directors:
Joe Kiani⁽²⁾	7,038,276	13.7	%
Mark de Raad⁽³⁾	226,660	*
Anand Sampath⁽⁴⁾	179,000	*
Rick Fishel⁽⁵⁾	151,022	*
Jon Coleman⁽⁶⁾	209,485	*
Steven J. Barker, Ph.D., M.D.⁽⁷⁾	152,000	*
Sanford Fitch⁽⁸⁾	138,000	*
Thomas Harkin	—	*
Jack Lasersohn⁽⁹⁾	123,000	*
Craig Reynolds⁽¹⁰⁾	40,000	*
Total Shares Held By Current Executive Officers and Directors (13 persons)⁽¹¹⁾	8,790,443	16.6	%
5% Stockholders:
Joe Kiani⁽²⁾	7,038,276	13.7	%
BlackRock, Inc.⁽¹²⁾	5,829,624	11.8	%
Janus Capital Management LLC⁽¹³⁾	2,792,803	5.6	%
The Vanguard Group⁽¹⁴⁾	3,623,964	7.3	%

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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 7, 2016, plus the number of shares of common stock that such person or group had the right to acquire within 60 days after March 7, 2016.

⁽²⁾

Comprised of 419,241 shares held directly, 2,948,453 shares held in four trusts for which Mr. Kiani is the sole trustee, 1,791,209 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 1,860,000 shares of Masimo common stock that were exercisable as of March 7, 2016 or that have or will become exercisable within 60 days after March 7, 2016, and 10,373 shares held for the Reporting Person’s account under the Masimo Retirement Savings Plan. As of March 7, 2016, 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 “Corporate Governance and Board Matters — Hedging and Pledging Policies” on page 20 of this Proxy Statement.


⁽³⁾	Comprised of 2,660 shares held for Mr. de Raad’s account under our Retirement Savings Plan and options to purchase 224,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁴⁾	Comprised of options to purchase 179,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁵⁾	Comprised of 37,022 shares of common stock held directly and options to purchase 114,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁶⁾	Comprised of 485 shares held for Mr. Coleman’s account under our Retirement Savings Plan and options to purchase 209,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁷⁾	Comprised of 60,000 shares of common stock held directly and options to purchase 92,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁸⁾	Comprised of 61,000 shares of common stock held directly and options to purchase 77,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽⁹⁾	Comprised of 1,000 shares of common stock held directly and options to purchase 122,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽¹⁰⁾	Comprised of options to purchase 40,000 shares of common stock that are exercisable within 60 days after March 7, 2016.


⁽¹¹⁾	Comprised of shares included under “Named Executive Officers and Directors”, 165,000 shares of common stock owned directly by one of our other executive officers and options to purchase an aggregate of 368,000 shares of common stock held by three of our other executive officers that are exercisable within 60 days after March 7, 2016.


⁽¹²⁾	BlackRock, Inc. (“BlackRock”) filed a Schedule 13G/A on January 8, 2016, reporting that it had sole dispositive power with respect to an aggregate of 5,829,624 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⁾

Janus Capital Management LLC (“Janus”) filed a Schedule 13G/A on February 16, 2016, reporting that it had sole voting and dispositive power with respect to an aggregate of 2,792,803 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.

⁽¹⁴⁾

The Vanguard Group (“Vanguard”) filed a Schedule 13G/A on February 10, 2016, reporting that it had sole voting power with respect to 97,197 shares, shared voting power with respect to 3,100 shares, sole dispositive power with respect to 3,526,767 shares, shared dispositive power with respect to 97,197 shares and beneficial ownership of an aggregate of 3,623,964 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.

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Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth additional information as of January 2, 2016 with respect to the shares of common stock that may be issued upon the exercise of options and other rights under our existing equity compensation plans and arrangements in effect as of January 2, 2016. The information includes the number of shares covered by and the weighted average exercise price of outstanding options and the number of shares remaining available for future grant, excluding the shares to be issued upon exercise of outstanding options.

Equity Compensation Plan Information



Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders⁽¹⁾	9,201,911	$	25.46	6,655,325	⁽²⁾
Equity compensation plans not approved by security holders⁽³⁾	—	—		—
Total	9,201,911	$	25.46	6,655,325

___________


⁽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 2,703,385 Restricted Share Units that were unvested and outstanding as of January 2, 2016. The remaining amount of 3,951,940 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 January 2, 2016, we did not have any equity compensation plans that were not approved by our stockholders.

SECTION 16(A) BENEFICIAL OWNERSHIP

REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who beneficially own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes of ownership of common stock and our other equity securities. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended ~~December 28, 2013,~~January 2, 2016, our officers, directors and greater than ten percent beneficial owners complied with all Section 16(a) filing requirements applicable to ~~them.~~them, other than an amended Form 4 filed on behalf of Mr. Fishel in May 2015 with respect to three transactions effected in February, March and May 2015.

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TRANSACTIONS WITH RELATED PERSONS, PROMOTERS AND

CERTAIN CONTROL PERSONS

Related Person Transactions Policy and Procedures

We adopted a written Related Person Transactions Policy that sets forth our policies and procedures regarding the identification, review, consideration and approval or ratification of transactions with related persons. For purposes of our policy only, a “related person transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) and any “related person” were, are or will be participants involving an amount that exceeds $120,000. For purposes of the policy, a related person is:

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.

Under the policy, prior to entering into a related person transaction, our legal department must present information regarding the proposed related person transaction to our Nominating, Compliance and Corporate Governance Committee for approval at its next regularly scheduled meeting (or, where our legal department, in consultation with our Chief Executive Officer or Chief Financial Officer, determines that it is not practicable to or desirable to wait until the next meeting of the Nominating, Compliance and Corporate Governance Committee, to the Chairperson of our Nominating, Compliance and Corporate Governance Committee, who is authorized under the policy to act on behalf of the Nominating, Compliance and Corporate Governance Committee with respect to matters covered by the policy between meetings of the Nominating, Compliance and Corporate Governance Committee).

To identify proposed related person transactions in advance, our legal department relies on information supplied by our directors, executive officers or ~~our~~ business unit or function/department leader responsible for the proposed related person transaction. In considering related person transactions, the Nominating, Compliance and Corporate Governance Committee (or the Chairperson of the Nominating, Compliance and Corporate Governance Committee) takes into account all relevant facts and circumstances related to the proposed transaction. In the event a member of the Nominating, Compliance and Corporate Governance Committee, or any immediate family member or affiliate of a member of the Nominating, Compliance and Corporate Governance Committee is the related person, such member of the Nominating, Compliance and Corporate Governance Committee is prohibited from participating in any review, consideration or approval of the related person transaction. The policy requires that the Nominating, Compliance and Corporate Governance Committee will only approve a related person transaction if it determines that the transaction is in, or is not inconsistent with, our best interests and the best interests of our stockholders.

Under the policy, the following related person transactions are deemed to be pre-approved by the Nominating, Compliance and Corporate Governance Committee regardless of the amount involved:

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;

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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.

The policy also permits our Nominating, Compliance and Corporate Governance Committee to ratify, amend, rescind or terminate any related person transaction that is not pre-approved in accordance with the terms above.

Transactions with Related Persons

The following is a description of transactions or series of transactions since ~~December 30, 2012,~~January 3, 2015, or any currently proposed transaction, to which we were or are to be a participant in which the amount involved in the transaction or series of transactions exceeds $120,000, and in which any of our directors, executive officers or persons who we know held more than five percent of any class of our capital stock, including their immediate family members, had or will have a direct or indirect material interest, other than compensation arrangements that are described under ~~“Compensation Discussion~~“Executive Compensation—Employment Contract and ~~Analysis—Employment Agreement and Offer Letters”~~Severance Arrangements” above.

Cercacor Laboratories, Inc.

Cercacor Laboratories, Inc. (“Cercacor”) is an independent entity spun off from us to our stockholders in 1998. Joe Kiani, ~~and Jack Lasersohn, members of our Board, are also members of the board of directors of Cercacor. Joe Kiani,~~ our Chairman and Chief Executive Officer, is also the Chairman and Chief Executive Officer of Cercacor. Mr. ~~Lasersohn is~~Kiani receives a ~~member~~separate salary and equity compensation from Cercacor in his capacity as an employee of ~~our compensation committee.~~ Cercacor.

We are a party to a cross-licensing agreement with Cercacor, which was amended and restated effective January 1, 2007 (the “Cross-Licensing Agreement”), that governs each party’s rights to certain of the intellectual property held by the two companies. To date, ~~Masimo~~the Company has developed and commercially released devices that measure carbon monoxide, methemoglobin and hemoglobin using licensed rainbow^®technology. ~~In December 2013, Masimo exercised its right to acquire the licensing rights to five additional parameters at a predetermined cost of $0.5 million per license.~~ Pursuant to the Cross-Licensing Agreement, we are currently subject to certain specific minimum royalty payment obligations of $5.0 million per year. Actual aggregate royalty payment liabilities were ~~$5.4~~$5.5 million for fiscal 2015.

In addition, to accelerate the development of the technology and product development ~~of Masimo’s total hemoglobin spot check measurement~~supporting our Pronto-7^® device, in February 2009, Masimo agreed to ~~fund additional~~reimburse Cercacor ~~engineering expenses. Specifically, these expenses included third party~~for all third-party engineering materials and supplies ~~expense as well as~~expenses related to Pronto-7^® development and 50% of total Cercacor engineering and engineering related payroll expenses from April 2009 until completion of the product development efforts. Beginning in 2012, due to a revised estimate of the support required by Masimo to complete the various total hemoglobin related projects, Masimo’s Board approved an increase in the percentage of Cercacor’s total engineering and ~~engineering related~~engineering-related payroll expenses ~~funded~~and this arrangement was discontinued by ~~Masimo~~mutual agreement effective January 4, 2015. During fiscal 2015, Cercacor completed a review of its fiscal 2014 cross-charges related to Pronto-7^®. Based on this review, it was determined that less than 60% of Cercacor’s total engineering and engineering-related payroll expenses were attributable to the development of Pronto-7^®, resulting in an overpayment by us to Cercacor of approximately $1.6 million for fiscal 2014. In addition, in fiscal 2015, we and Cercacor agreed to equally share approximately $1.4 million of previously incurred engineering-related payroll expenses associated with research for a new LED sensor technology and, as a result, we and Cercacor mutually agreed that Cercacor would refund $0.9 million to us.

During fiscal 2015, we also agreed to compensate Cercacor for certain engineering consulting and clinical studies support services that Cercacor may provide to the Company from ~~50% to 60%. These expenses totaled $4.1~~time-to-time. Expenses incurred by the Company for such services were $0.3 million for the fiscal year ended ~~December 28, 2013.~~January 2, 2016.

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Company granted Cercacor an irrevocable, non-exclusive, worldwide license with respect to the products and services covered by the Purchased Patents.

Prior to our initial public offering in August 2007, our stockholders owned approximately 99.9% of the outstanding capital stock of Cercacor, and we believe that as of March ~~14, 2014,~~7, 2016, a number of stockholders of Cercacor continued to own shares of our common stock. Mr. Kiani is the only stockholder of Cercacor who owns 5% or more of Masimo’s outstanding voting stock.

Indemnification Agreements with Directors and Executive Officers

We have entered into indemnity agreements with our directors and executive officers under which we agreed to indemnify those individuals under the circumstances and to the extent provided for in the agreements, for expenses, damages, judgments, fines, settlements and any other amounts they may be required to pay in actions, suits or proceedings which they are or may be made a party or threatened to be made a party by reason of their position as a director, officer or other agent of ours, and otherwise to the fullest extent permitted under Delaware law and our Bylaws. We also have an insurance policy covering our directors and executive officers with respect to certain liabilities, including liabilities arising under the Securities Act of 1933, as amended, or otherwise. We believe that these provisions and insurance coverage are necessary to attract and retain qualified directors, officers and other key employees.

Registration Rights

Pursuant to our Fifth Amended and Restated Registration Rights Agreement dated September 14, 1999, certain stockholders affiliated with ~~two~~one of our directors, ~~Messrs. Cahill and~~Mr. Lasersohn, have the right in specified circumstances to require us to register their shares under the Securities Act of 1933, as amended, for resale to the public. Generally, we are required to bear all registration and selling expenses incurred in connection with any registration required by these stockholders, other than underwriting discounts and commissions. We are also required to bear the reasonable fees and expenses of one counsel for the selling stockholders in each registration.

HOUSEHOLDING

A copy of our Annual Report on Form 10-K for the fiscal year ended ~~December 28, 2013,~~January 2, 2016, as filed with the SEC on February ~~14, 2014~~24, 2016 (the “Form 10-K”), which is our ~~2013 annual report,~~2015 Annual Report, is being mailed to you along with this Proxy Statement. We are sending only one annual report and proxy statement to “street name” stockholders who share a single address unless we received contrary instructions from any stockholder at that address. This practice, known as ~~“householding,”~~“householding”, is designed to reduce our printing and postage costs. However, if you are residing at such an address and wish to receive a separate annual report or proxy statement in the future, you may request them by calling our Corporate Secretary at (949) 297-7000, or by submitting a request in writing to our Corporate Secretary, c/o Masimo Corporation, ~~40 Parker,~~52 Discovery, Irvine, California 92618, and we will promptly deliver a separate annual report and proxy statement to you. If you are receiving multiple copies of our annual report and proxy statement, you can request householding by contacting the Corporate Secretary in the same manner described above.

ANNUAL REPORT ON FORM 10-K

A copy of our Form 10-K is available without charge upon written request to Corporate Secretary, c/o Masimo Corporation, ~~40 Parker,~~52 Discovery, Irvine, California 92618.

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IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON ~~JUNE 5, 2014:~~APRIL 20, 2016:

The Proxy Statement, the Form 10-K and the Proxy Card are available atat:~~www.proxyvote.com.~~

www.envisionreports.com/MASI

OTHER MATTERS

The Board knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.



	By Order of the Board of Directors



	Chairman & Chief Executive Officer

~~April 28, 2014~~March 16, 2016

You are cordially invited to attend the annual meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy or submit your proxy through the ~~Internet~~internet or by telephone as promptly as possible in order to ensure your representation at the meeting. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience if you wish to submit your proxy by mail. Even if you have voted by proxy, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other ~~nominee~~agent and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

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APPENDIX A

SUPPLEMENTAL CONSTANT CURRENCY NON-GAAP INFORMATION

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP). The non-GAAP financial measures presented make adjustments for the items summarized in the tables below. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the Company’s on-going core operating performance. The non-GAAP financial measures reflect adjustments for the following items, as well as the related income tax effects thereof:

Constant currency F/X adjustments. Some of our sales agreements with foreign customers provide for payment in currencies other than the U.S. Dollar. Similarly, certain of our product costs and operating expenses, and the related balance sheet payables and accruals, are denominated in foreign currencies other than the U.S. Dollar. These foreign currency revenues, costs and expenses, receivables, payables and accruals, when converted into U.S. Dollars, can vary significantly from period to period depending on the average and quarter-end exchange rates during a respective period. We believe that comparing these foreign currency denominated revenues, costs and expenses, receivables, payables and accruals by holding the exchange rates constant with the prior year period is useful to management and investors in evaluating the performance of our ongoing operations on a period-to-period basis. We anticipate that fluctuations in foreign exchange rates and these related constant currency and other foreign exchange adjustments will continue to occur in future periods.

Management believes that the non-GAAP adjustments for constant currency F/X adjustments assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the Company’s on-going core operating performance. The Company has presented the following non-GAAP measures on a basis consistent with its historical presentation, to assist investors in understanding the Company’s core net operating results on an on-going basis: (i) adjusted constant currency non-GAAP net income attributable to Masimo Corporation stockholders, (ii) adjusted constant currency non-GAAP product revenue and total revenue and (iii) adjusted constant currency non-GAAP net income per diluted share attributable to Masimo Corporation stockholders. Management believes that these are important measures in the evaluation of the Company’s performance and uses these measures to better understand and evaluate our business.

These non-GAAP financial measures have certain limitations in that they do not reflect all of the costs associated with the operations of the Company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the Company may be different from the non-GAAP financial measures used by other companies.

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APPENDIX A SUPPLEMENTAL CONSTANT CURRENCY NON-GAAP INFORMATION (unaudited in thousands, except percentages and per share amounts)

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME ATTRIBUTABLE TO MASIMO STOCKHOLDERS:
		Twelve Months Ended
		January 2, 2016			January 3, 2015
GAAP net income attributable to Masimo Corporation stockholders		$	83,300		$	72,518

Non-GAAP adjustments:
	Constant currency F/X adjustments:
	Product revenue	18,640			—
	Cost of goods sold	(4,266		)	—
	Operating expenses	(7,250		)	—
	Non-operating income	428			—
	Subtotal - Constant currency F/X adjustments	7,552			—

	Net tax impact of above items	156			—

	Total constant currency non-GAAP adjustments	7,708			—

Adjusted constant currency non-GAAP net income attributable to Masimo Corporation stockholders		$	91,008		$	72,518



RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE:
		Twelve Months Ended
		January 2, 2016		January 3, 2015
GAAP product revenue		$	599,334	$	556,764

Non-GAAP adjustments:
	Constant currency F/X adjustments	18,640		—
	Total constant currency non-GAAP product revenue adjustments	18,640		—

Adjusted constant currency non-GAAP product revenue		617,974		556,764

GAAP royalty revenue		30,777		29,879

Adjusted constant currency non-GAAP total revenue		$	648,751	$	586,643



RECONCILIATION OF GAAP NET INCOME PER DILUTED SHARE TO NON-GAAP NET INCOME PER DILUTED SHARE:
		Twelve Months Ended
		January 2, 2016		January 3, 2015
GAAP net income per diluted share attributable to Masimo Corporation stockholders		$	1.55	$	1.30

Non-GAAP adjustments:
	Constant currency F/X adjustments	0.14		—
	Net tax impact of above item	—		—
	Adjusted constant currency non-GAAP net income per diluted share adjustments	0.14		—

Adjusted constant currency non-GAAP net income per diluted share attributable to Masimo Corporation stockholders		$	1.69	$	1.30

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APPENDIX B

SUPPLEMENTAL EXECUTIVE MULTI-YEAR PLAN F/X ADJUSTED

NON-GAAP INFORMATION

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with U.S. generally accepted accounting principles (GAAP). The non-GAAP financial measures presented make adjustments for the items summarized in the tables below. Management believes that adjustments for these items are necessary to properly assess performance against the annual product revenue and earnings per share goals originally established. The non-GAAP financial measures reflect adjustments for the following items, as well as the related income tax effects thereof:

Executive Multi-Year Plan F/X adjustments. Some of our sales agreements with foreign customers provide for payment in currencies other than the U.S. Dollar. Similarly, certain of our product costs and operating expenses, and the related balance sheet payables and accruals, are denominated in foreign currencies other than the U.S. Dollar. These foreign currency revenues, costs and expenses, receivables, payables and accruals, when converted into U.S. Dollars, can vary significantly from period to period depending on the average and quarter-end exchange rates during a respective period. For purposes of measuring performance against the Executive Multi-Year Plan product revenue and earnings per share goals, we believe that comparing these foreign currency denominated revenues, costs and expenses, receivables, payables and accruals by holding the exchange rates constant with the rates in effect at the time the Executive Multi-Year Plan goals were set is necessary to truly assess actual performance against such goals.

Management believes that the non-GAAP adjustments for Executive Multi-Year Plan F/X adjustments assist the Compensation Committee and investors in assessing true Company performance against the product revenue and earnings per share goals established at the beginning of the Executive Multi-Year Plan. The Company has presented the following non-GAAP measures on a basis consistent with its historical presentation, to assist investors in understanding the Company’s core net operating results on an on-going basis: (i) Executive Multi-Year Plan F/X adjusted non-GAAP net income attributable to Masimo Corporation stockholders, (ii) Executive Multi-Year Plan F/X adjusted non-GAAP product revenue and (iii) Executive Multi-Year Plan F/X adjusted non-GAAP net income per diluted share attributable to Masimo Corporation stockholders.

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APPENDIX B SUPPLEMENTAL EXECUTIVE MULTI-YEAR PLAN F/X ADJUSTED NON-GAAP INFORMATION (unaudited in thousands, except percentages and per share amounts)

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP NET INCOME ATTRIBUTABLE TO MASIMO STOCKHOLDERS:
		Twelve Months Ended
		January 2, 2016			January 3, 2015
GAAP net income attributable to Masimo Corporation stockholders		$	83,300		$	72,518

Non-GAAP adjustments:
	Executive Multi-Year Plan F/X adjustments:
	Product revenue	19,878			1,751
	Cost of goods sold	(5,248		)	(1,175		)
	Operating expenses	(8,170		)	(812		)
	Non-operating income	496			994
	Subtotal - Constant currency F/X adjustments	6,956			758

	Net tax impact of above items	(612		)	(66		)

	Total Executive Multi-Year Plan F/X non-GAAP adjustments	6,344			692

Executive Multi-Year Plan F/X adjusted non-GAAP net income attributable to Masimo Corporation stockholders		$	89,644		$	73,210



RECONCILIATION OF GAAP REVENUE TO NON-GAAP REVENUE:
		Twelve Months Ended
		January 2, 2016		January 3, 2015
GAAP product revenue		$	599,334	$	556,764

Non-GAAP adjustments:
	Executive Multi-Year Plan F/X adjustments	19,878		1,751
Total Executive Multi-Year Plan F/X non-GAAP product revenue adjustments		19,878		1,751

Executive Multi-Year Plan F/X adjusted non-GAAP product revenue		$	619,212	$	558,515



RECONCILIATION OF GAAP NET INCOME PER DILUTED SHARE TO NON-GAAP NET INCOME PER DILUTED SHARE:
		Twelve Months Ended
		January 2, 2016			January 3, 2015
GAAP net income per diluted share attributable to Masimo Corporation stockholders		$	1.55		$	1.30

Non-GAAP adjustments:
	Executive Multi-Year Plan F/X adjustments	0.13			0.01
	Net tax impact of above item	(0.01		)	—
	Total Executive Multi-Year Plan F/X net income per diluted share adjustments	0.12			0.01

Executive Multi-Year Plan F/X adjusted non-GAAP net income per diluted share attributable to Masimo Corporation stockholders		$	1.67		$	1.31

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Directions to the Annual Meeting of Stockholders of Masimo Corporation

Masimo Corporation

~~40 Parker~~52 Discovery

Irvine, California 92618

(949) 297-7000

From the North (Los Angeles/Long Beach/John Wayne Airport)

Take 405 Fwy South. ~~Exit Bake Parkway~~Take SAND CANYON AVE exit.

Turn Left on ~~BAKE PKWY~~ SAND CANYON AVE—go ~~2.84~~4.6 miles

Turn Right on BARRANCA PKWY—go 1.7 miles

Turn Left on ~~IRVINE BLVD/TRABUCO RD—~~DISCOVERY—go ~~0.20 miles~~

~~Turn Right on PARKER—go 0.10~~0.3 miles

Arrive at ~~40 PARKER,~~52 DISCOVERY, IRVINE, on the ~~Left~~Right

From the South (San Diego and points South of Irvine)

Take 5 Fwy North. ~~Exit Bake Parkway~~Take ALTON PKWY exit.

Turn Left on ALTON PKWY—go 0.4 miles.

Turn Right on ~~BAKE PKWY~~ IRVINE CENTER DRIVE—go ~~2.84~~0.8 miles

Turn Left on ~~IRVINE BLVD/TRABUCO RD—~~DISCOVERY—go ~~0.20 miles~~

~~Turn Right on PARKER—go 0.10~~0.1 miles

Arrive at ~~40 PARKER,~~52 DISCOVERY, IRVINE, on the Left

From the East (Riverside County)

Take the 91 Fwy West or the 55 Fwy South

Take 5 Fwy South. ~~Exit Bake Parkway~~Take exit for California 133S towards Laguna Beach

~~Turn Left on BAKE PKWY~~ Keep right for BARRANCA PKWY—go ~~2.84 miles~~

~~Turn Left on IRVINE BLVD/TRABUCO RD—go 0.20~~0.6 miles

Turn Right on ~~PARKER—~~BARRANCA PKWY—go ~~0.10~~0.1 miles

Turn Right on DISCOVERY—go 0.3 miles

Arrive at ~~40 PARKER,~~52 DISCOVERY, IRVINE, on the ~~Left~~Right

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Electronic Voting Instructions

Available 24 hours a day, 7 days a week!

Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.

VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Proxies submitted by the ~~Internet~~internet or telephone must be received by 11:00 p.m., Pacific Time, on ~~June 3, 2014.~~April 19, 2016



	Vote by ~~Internet~~ internet • Go to ~~www.investorvote.com/~~www.envisionreports.com/MASI • Or scan the QR code with your smartphone • Follow the steps outlined on the secure website

Vote by telephone

• Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone. There is NO CHARGE to you for the call.

• Follow the instructions provided by the recorded message



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

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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

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THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS ~~MADE.~~MADE HEREIN. IF NO SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE ~~NOMINEES~~NOMINEE FOR DIRECTOR IN PROPOSAL NO. 1, FOR THE APPROVAL OF PROPOSAL NO. 2 AND FOR THE APPROVAL OF PROPOSAL NO. 3.

PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED ENVELOPE WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.



		Proposals

The Board of Directors recommends a vote FOR each of the following proposals:




1.	~~Election of Class I Directors:~~	For	Against	Abstain
1.	~~01 - Dr. Steven J. Barker~~Election of Class III Director:	o	o	o
	02 - ~~Mr. Sanford Fitch~~ Craig Reynolds	o	o	o
2.	To ratify the selection of Grant Thornton LLP as the Company’s independent registered public accounting firm for fiscal year ~~2014.~~ending December 31, 2016.	o	o	o
3.	Advisory ~~vote~~resolution to approve named executive officer compensation.	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.

This proxy is governed by the laws of the State of Delaware.



		Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below

Please sign exactly as your name or names appear hereon. When signing as attorney-in-fact, executor, administrator, trustee or guardian, please give your full title as such. If shares are held jointly, each holder must sign. If the signer is a corporation, please give the full corporate name and have a duly authorized officer sign, stating his or her title. If the signer is a partnership, please sign in ~~partnership~~the partnership’s name by an authorized person.

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01GPJD

You can view the Annual Report and Proxy Statement on the ~~Internet~~internet at www.masimo.com

IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.

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		+
Proxy — MASIMO CORPORATION

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON ~~JUNE 5, 2014~~APRIL 20, 2016 MASIMO CORPORATION

~~40 PARKER,~~52 DISCOVERY, IRVINE, CALIFORNIA 92618

THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.

The undersigned hereby appoints Joe Kiani and Mark P. de Raad, and each of them, with full power of substitution as proxies and agents, in the name of the undersigned, to attend the Annual Meeting of Stockholders of Masimo Corporation, a Delaware corporation (“Masimo”), to be held at Masimo’s principal executive offices at ~~40 Parker,~~52 Discovery, Irvine, California 92618, on ~~June 5, 2014,~~April 20, 2016, at ~~10:~~2:00 ~~a.m.~~p.m. local time, or any adjournment or postponement thereof, and to vote the number of shares of Masimo’s capital stock that the undersigned would be entitled to vote, and with all the power the undersigned would possess, if personally present, as specified on the reverse side.



	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.		+

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o		Preliminary Proxy Statement
o		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ý		Definitive Proxy Statement
o		Definitive Additional Materials
o		Soliciting Material Pursuant to §240.14a-12



MASIMO CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
ý	No fee required.
o	Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
	(1)	Title of each class of securities to which transaction applies:
	(2)	Aggregate number of securities to which transaction applies:
	(3)	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):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
o	Fee paid previously with preliminary materials.
o	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.
	(1)	Amount Previously Paid:
	(2)	Form, Schedule or Registration Statement No.:
	(3)	Filing Party:
	(4)	Date Filed:


1.	To elect the following nominee as a Class III director to serve until our 2019 Annual Meeting of Stockholders: Mr. Craig Reynolds;


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


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

Date (mm/dd/yyyy) — Please print date below.

Signature 1 — Please keep signature within the box.

Signature 2 — Please keep signature within the box.