Executive Annual Cash Bonus Award Plan



 EXHIBIT 10.40 
 MASIMO CORPORATION 
 EXECUTIVE ANNUAL 
 CASH BONUS AWARD PLAN 
  

 Plan Document 
  








 MASIMO CORPORATION 
 EXECUTIVE ANNUAL CASH BONUS AWARD PLAN 
  

 Plan Document 
  

 ARTICLE I 
 PURPOSE OF THE PLAN

 Effective January 1, 2007, Masimo Corporation (the “Company”) has established this Masimo Corporation Annual Cash Bonus Award
Plan (the “Plan”) to provide its Executive Officers and other officers and key employees designated by the Committee (the “Designated Employees”) with additional incentives to deliver exceptional financial and
operational results on an annual basis. 
 ARTICLE II 
 DEFINITIONS 
  

	2.1	“Base Salary” shall mean a Participant’s base rate of annual salary that is in effect on the last day of the Plan Year to which the Bonus relates.


  

	2.2	“Board” shall mean the Board of Directors of the Company. 

  

	2.3	“Bonus” shall mean the amount payable to a Participant pursuant to the Plan. 

  

	2.4	“Committee” shall mean any committee that the Board may appoint to serve at the Board’s pleasure for purposes of administering the Plan; provided that the
Board may at any time act as the Committee and shall serve in that capacity in the absence of a duly-appointed committee. 

  

	2.5	“Company Factor” shall mean the percentage rating that the Committee determines for a Plan Year pursuant to Section 4.2(b) below. 

  

	2.6	“Executive Officers” shall mean the Chief Executive Officer of the Company (the “CEO”), any vice president of the Company in charge of a business
unit or function (such as sales, administration or finance), any other officer who performs a policy making function or any other person who performs similar policy making functions for the Company and directly reports to the CEO. Executive officers
of subsidiaries of the Company who perform such policy making functions for the Company and report to the CEO of the Company shall be Executive Officers for purposes of this definition. 

  

	2.7	“Individual Factor” shall mean the percentage rating that the Manager determines for a Plan Year pursuant to Section 4.2(c) below. 









	2.8	“Manager” shall mean the person that the Participant directly reports to for the Plan Year. In the case of each Executive Officer other than the CEO, the CEO shall
be deemed the Manager. 

  

	2.9	“Maximum Bonus” shall mean the percentage rating that the Committee determines for a Plan Year pursuant to Section 4.2(d) below. 

  

	2.10	“Participant” shall mean the Executive Officers and Designated Employees eligible to receive a Bonus under the Plan, pursuant to Article III herein.


  

	2.11	“Plan Year” shall mean the period commencing January 1 and ending December 31. 

  

	2.12	“Target Bonus” shall mean the percentage rating that the Committee determines for a Plan Year pursuant to Section 4.2(a) below. 

 ARTICLE III 
 ELIGIBILITY FOR
PARTICIPATION 
  

	3.	An Executive Officer and Designated Employee shall be eligible to participate in the Plan, and thereby become a Participant for a particular Plan Year if and only if the Committee
determines in its sole and absolute discretion that other than the Company’s Executive Multi-Year Cash Bonus Award Plan, as amended from time to time, or a severance plan or agreement with the Company, the Executive Officer is not covered by
another cash bonus arrangement or agreement or another non-equity variable compensation plan with the Company for the Plan Year. 

 ARTICLE IV 
 BONUS AMOUNTS AND PAYMENTS 
  

	4.1	CONDITIONS FOR BONUS PAYMENTS. The Company will pay Bonuses for a Plan Year if and only if the Committee has approved written resolutions either establishing the terms and
conditions relating to the payment of Bonuses that will apply for the Plan Year, or otherwise approving the payment of Bonuses. A Participant will be entitled to a Bonus for Plan Year only if the Participant is an employee of the Company when the
Company actually pays Bonuses for the Plan Year pursuant to Section 4.4 below, and, unless otherwise determined by the Committee, has been employed by the Company for at least six months and one day during the Plan Year to which the Bonus
relates. Any Participant whose employment with the Company terminates for any reason before the payment of Bonuses will automatically forfeit all rights under the Plan, and will not have any right to collect Bonuses or other amounts hereunder.


  

	4.2	 CALCULATION OF BONUSES. For each Plan Year, each Participant’s Bonus will equal the product of (i) the Participant’s Base Salary, (ii) the
Target Bonus applicable to the Participant, (iii) the Company Factor and (iv) the Participant’s Individual Factor, subject to the Committee’s discretion to pay Bonuses up to any 











	 	 
Maximum Bonus Percentage of Base Salary for any Plan Year in lieu of the Target Bonus. The Committee will determine the Target Bonus, the Maximum Bonus, and
each of these factors in accordance with the following methodology, subject to any modifications or adjustments that the Committee may set forth for a Plan Year in its determinations of the Plan’s terms and conditions for the Plan Year or as
otherwise approved by the Committee, and subject to the pro rata adjustment set forth in Section 4.3 for Participants who were employees for less than the entire Plan Year. 


  

	 	(a)	Target Bonus. The Committee will establish written target bonus guidelines (referred to as the “Target Bonus”) on the basis of job classifications that assign a
targeted Bonus percentage of Base Salary to each job classification. The Committee may nevertheless in its sole and absolute discretion vary from these guidelines on a case-by-case basis by providing written notice to any affected Participant that
the Committee has assigned a different Target Bonus or classification to the Participant. Unless the Committee’s written guidelines for a Plan Year determine otherwise, the Target Bonus for the Plan Year shall refer to the following
classifications: 

  

					
	 Level
	  	 Job Classification
	  	 
	 1
	  	To be determined by the Committee	  	
	 2
	  	To be determined by the Committee	  	
	 3
	  	To be determined by the Committee	  	
	 4
	  	To be determined by the Committee	  	
	 5
	  	To be determined by the Committee	  	
	 6
	  	Executive Officers, excluding the CEO	  	
	 7
	  	CEO	  	

  

	 	(b)	Company Factor. Within the first three months of the Plan Year, the Board will approve the Company’s objectives and assessment criteria. The Committee will thereafter
provide information to each Participant about such objectives and assessment criteria. At the end of the Plan Year, the Committee, with the input from the CEO, will evaluate the Company’s performance by taking this information into account,
along with any other financial or other Company performance measures that the Committee determines to be relevant, and on the basis of these considerations the Committee will in its sole and absolute discretion rate the Company’s performance on
a percentage scale (which includes 0% as the lowest percentage in the range), with that percentage establishing the Company Factor for the Plan Year. In the event the Committee rates the Company’s performance for a Plan Year at: (i) less
than 100%, the Committee shall have the discretion to set the Company Factor at any percentage it deems appropriate (including 0%); (ii) 100%, the Company Factor shall automatically be set at 100%; and (iii) more than 100%, the Committee
shall have the discretion to set the Company Factor at any percentage it deems appropriate, provided that the Company Factor shall not be less than 100%. 









	 	(c)	Individual Factor. At the end of the Plan Year, the Manager will determine a Participant’s Individual Factor for a Plan Year on a scale of 0% to 100%, based on the
Manager’s discretionary assessment of the Participant’s overall performance, taking into account a variety of factors including specific duties or goals assigned to the Participant during the Plan Year; provided that, with respect to any
Participant for which the CEO is not the Manager, the CEO shall have final authority to modify a Participant’s Individual Factor for a Plan Year. In the case of the CEO, the Committee shall assess the CEO’s overall performance and
determine the Individual Factor for the CEO for the Plan Year; provided that, in the event the Committee establishes the Company Factor at or above 100%, the Individual Factor for the CEO shall automatically equal 100%.


  

	 	(d)	Maximum Bonus. The Committee will establish written maximum bonus guidelines (referred to as the “Maximum Bonus”) for each Plan Year on the basis of job
classifications that assign a Maximum Bonus percentage of Base Salary to each job classification. The Committee may nevertheless in its sole and absolute discretion vary from these guidelines on a case by case basis by providing written notice to
any affected Participant that the Committee has assigned a different Maximum Bonus or classification to the Participant. Unless the Committee’s written guidelines for a Plan Year determines otherwise, the Maximum Bonus for the Plan Year shall
refer to the classifications set forth in subsection 4.2(a) above. 

  

	4.3	PRO RATED BONUSES. If an employee first becomes a Participant after a Plan Year begins (for example, because of being a new hire) the Committee will adjust the employee’s Bonus
for the Plan Year on a pro rata basis to reflect the number of full weeks during the Plan Year during which the employee was a Participant. For example, an employee who becomes a Participant on June 30th of a Plan Year ending December 31st
would be a Participant for 26 of 52 weeks, and therefore be entitled to a Bonus equal to 50% of the amount determined pursuant to Section 4.2 above for a similarly-situated employee who is a Participant for the entire Plan Year.


  

	4.4	TIME OF PAYMENT. The Company will pay Bonuses for a Plan Year as soon as possible after the end of the Plan Year, but in no event later than the December 31st immediately
following the end of the Plan Year. 

  

	4.5	APPLICABLE TAXES. 

  

	 	(a)	Employment Taxes. The Company shall reduce all Bonuses by an amount sufficient to pay all applicable Social Security, withholding, and other employment taxes that are payable
with respect to the Bonuses. 

  

	 	(b)	 Income Taxes and Deferred Compensation. Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in
connection with this Plan (including any taxes arising under Section 409A of the Internal Revenue Code). Neither the Company nor its affiliates nor any of their 











	 	 
directors, agents or employees shall have any obligation to indemnify or otherwise hold any Participant harmless from any or all of such taxes.



 ARTICLE V 
 RIGHTS OF PARTICIPANTS 
  

	5.1	LIMITED RECAPTURE OF BONUSES. The Company may not recover Bonus payments that Participants have appropriately received pursuant to the Plan, subject to any recapture provision that
the Committee adopts in writing during the first three months of a Plan Year, for application to Bonuses payable for the Plan Year. 

  

	5.2	NOT A CONTRACT OF EMPLOYMENT. Nothing in this Plan gives a Participant the right to remain in the employ of the Company. Except to the extent explicitly provided otherwise in a then
effective written employment contract executed by the Participant and the Company, each Participant is an at will employee whose employment may be terminated without liability at any time for any reason. 

 ARTICLE VI 
 ADMINISTRATION

 The Committee shall be responsible for administering the Plan, and shall have the right to construe the Plan, to interpret any provision of the Plan,
to make rules and regulations relating to the Plan, and to determine any factual or legal question arising in connection with the Plan’s operation. The Committee may in its discretion make factual determinations based on any investigation or
hearing that the Committee may deem appropriate. Any decision made by the Committee under the provisions of this Article shall be conclusive and binding on all parties concerned. The Committee may delegate to the Company’s officers or other
employees the authority to execute and deliver instruments and documents associated with the Plan, and to take all other steps deemed necessary, advisable or convenient for the administration of this Plan in accordance with its terms and purpose.

 ARTICLE VII 
 AMENDMENT OR TERMINATION OF PLAN 
 The Committee shall have the unilateral right to amend, suspend, modify or terminate this Plan at any
time with respect to all or some Participants and with respect to any unpaid Bonuses that are or could have become payable, whether for the current or any future years.