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Shelter Labor Services Agreement, Dated 12/27/2000

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Sectors: Health Products and Services
Governing Law: California , View California State Laws
Effective Date: December 27, 2000
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Exhibit 10.11

*** Text Omitted and Filed Separately

Confidential Treatment Requested Under 17 C.F.R. a7a7 200.80(b)(4)

and 230.406


This Agreement is made and entered into this 27th day of December, 2000, by and between Industrial Vallera de Mexicali, S.A. de C.V., a Mexican Corporation (IVEMSA) and MASIMO CORPORATION (MASIMO) a Delaware Corporation, which will be in force once at least five employees had been hired, and which is executed in accordance with the following:


First. That Industrial Vallera de Mexicali, S.A. de C.V. is a mercantile corporation duly incorporated under Mexican laws, and that its business purpose is to offer administrative, accounting, customs and traffic, and human resources services to foreign companies that want to have a maquiladora process in this city of Mexicali, B.C

Second. That Mr. Sergio Tagliapietra N., has enough faculties to act and enter this shelter agreement on behalf of IVEMSA. Third. MASIMO states that it is an American Corporation duly incorporated under the laws of the State of Delaware, in the United States of America, and that Mr. Gary L. Waite is empowered to act as legal representative of such corporation.

Fourth. MASIMO declares that it desires to contract the services offered by IVEMSA, according to the following


I. SCOPE OF AGREEMENT. Pursuant to this Agreement, IVEMSA agrees to render the administrative services for the Maquila operation to MASIMO or to those third parties that MASIMO may indicate, under the terms of this agreement. Therefore, MASIMO will operate under the IVEMSA quality system until notified to operate under MASIMO quality system, according to this agreement. IVEMSA will be responsible for the following functions: general management and administration of Maquiladora operations including personnel recruiting, employee relations, import/export. supervision and documentation, general accounting and all payroll services. In addition, IVEMSA will serve as project manager in planning and executing the transfer of the new company into Mexico, including the coordination of building improvements as required by MASIMO for the manufacturing site that has been previously selected and approved, according to the layout and building improvements list herein attached as exhibit " A."

MASIMO will be responsible not only for any and all payment herein established, but also for the direct supervision of personnel within the facility, supervision and guard of raw material, equipment and operational control.

- 1 - II. LABOR PROVISIONS. IVEMSA shall make its best effort to supply MASIMO with all personnel needed, to be hired under the following provisions: a. Upon each written request by MASIMO, IVEMSA shall employ and make available to MASIMO the requested number of personnel, who meet the basic qualifications.

b. Basic qualifications as established in every job description, for assembly line personnel will be supplied to IVEMSA at the time of this Agreement. c. IVEMSA will screen and hire all prospective employees for assembly operations, according to the number or employees determined by MASIMO. In relation to Administrative and Director Positions MASIMO will decide not only the number of employees, but also the background they shall meet, and MASIMO will have the final hiring decision.

d. Any salaried or Management personnel requested by MASIMO and supplied by IVEMSA will be at a mutually agreed daily salary rate. Such personnel will be billed for on a weekly basis.

e. The agreed daily salary rates shall include all fringe costs such as taxes, insurance, and other normal employee costs for this type of personnel. f. As used in this contract, the term " fringe" shall mean those benefits required under Mexican law or benefits required to maintain a stable work force, as determined by MASIMO. (Exhibit " C" articles from the Mexican Federal Labor Law GLW 27 Dec 00)

g. IVEMSA shall prepare. each individual labor proposal for indirect labor in order to prepare the corresponding agreement for each employee. The Labor Proposal shall be previously approved by MASIMO, even though IVEMSA appears as and is the employer, and which shall contain a confidentiality clause.

h. IVEMSA agrees to terminate any employee upon the written request of MASIMO, and MASIMO hereby assumes responsibility regarding severance pay as pass through expense

i. The labor billings and fringes will be invoiced weekly on a pass through basis based on hours paid, and shall be billed in U.S. Dollars at the exchange rate prevailing at the time of payment, for the sale of dollars in the Mexican Banking Institution instructed by IVEMSA.

j. The administrative service charge as quoted hereunder will be invoiced weekly using the listed Hourly Rate Schedule.

- 2 - III. HOURLY RATE SCHEDULE. The administrative service charge will be invoiced weekly as follows: [85***85]

For the above purposes the following policies shall be observed:

1. IVEMSA agrees to maintain, at all times, complete accounting, administrative, payroll, tax and book-keeping records pertaining to such personnel. 2. Wages and salaries, authorized overtime, taxes, profit sharing, special bonuses, rate premiums and fringe benefits approved by MASIMO for the personnel assigned to its operation will be billed as a " pass through" , including severance or termination payments for employees terminated by IVEMSA during such period due to instructions from MASIMO. 3. Efficiency/productivity programs and bonuses may be implemented at MASIMO requests. The cost of such programs and bonuses will be treated as a " pass through" expense.

4. Authorized overtime hours will be billed as a pass through.

5. For second shift operations, IVEMSA will bill MASIMO and pay employees for forty-eight (48) hours per week, while, pursuant to the labor laws of Mexico, the employees will only work forty-five (45) hours per week. The same obligation will be observed for the third shift, even though the employees will work only 42 hours, as provided by Mexican Labor Law. * Confidential Treatment Requested

- 3 - 6. The above rates are binding for the first 36 months of the term of this Agreement, as said term is set forth hereunder. Such rates will be adjusted every year in accordance with any changes in the minimum or professional wages, as well as any inflationary change that may affect he operations of IVEMSA. No employees of IVEMSA shall be deemed employees of MASIMO under Mexican law. All personnel policies of IVEMSA, with respect to any changes to those policies must be approved by MASIMO in advance of implementation to insure production programs and/or quality of product are not degraded. Delays due to lack of prompt authorization will not be attributable to IVEMSA.IVEMSA shall immediately notify MASIMO of any labor disputes between IVEMSA and its workers and/or the union or coalition which represents them in the event that such disputes or disagreements may result in IVEMSA' s receiving a strike notice or in having raw materials or equipment in IVEMSA' s possession property of MASIMO which may be subjected to liens or attachments of any nature.

7. MASIMO responsibilities for labor claims or lawsuits and due to MASIMO direct supervision of personnel shall include the payment of obligations derived from Mexican Federal Labor Law, Infonavit Income Tax and Federal Payroll Tax Laws. Attending Conciliatory will be IVEMSA' s responsibility.

8. IVEMSA will be responsible for any liability arising from the failure to act as per item III above or by negligence from any of IVEMSA' s administrative personnel (including central services: Overall General Management, Accounting, Human Resources, Customs and Traffic and Project Management personnel only).

IV. IVEMSA RESPONSIBILITIES. The hourly rate schedule includes the following services that are provided by IVEMSA: A. OVERALL GENERAL MANAGEMENT

ullet Active non - monetary participation on MASIMO' s behalf within the National Maquiladora Association. ullet Active non - monetary participation on MASIMO' s behalf within the local Maquiladora Association. ullet Active non - monetary participation on MASIMO' s behalf within the Chamber of Industry. ullet Customs interface when it is needed.

ullet Maintain a close relationship with government officials, etc.

ullet Supervision of the Accounting, Human Resource, Customs and Traffic and Project departments.


ullet Submit monthly declarations of: State & Federal Taxes (Income Tax, Value Added Tax, Assets Tax, the corresponding contributions to the National Fund for the Workers Housing, to the Retirement Savings System, to the Mexican Institute of Social Security, etc.)

ullet Submit monthly reports to the Federal and State government agencies.

ullet Submit monthly adjustments to the Mexican Institute of Social Security.

ullet Weekly payroll and Work Order Reports.

ullet Review and authorize purchase orders.

ullet Review local suppliers.

ullet Pay suppliers, taxes and others.

ullet Invoicing.


ullet Analysis of customs documentation

ullet Import permits, balances, reports, etc.

ullet Preparation of invoices for raw material, machinery and equipment.

ullet Raw materials inventory and control. Once IVEMSA receives the raw material, IVEMSA shall advice MASIMO about the quantities of kits received, within the following five working days, in order to MASIMO be able to know if there were losses.

ullet Control balances on import permits.

ullet Follow up of shipments through customs.

ullet Preparation of invoices for finished product, and scrap returns.

ullet Coordination with U.S. and Mexican Customs Brokers.

ullet Supervision of loading and unloading of goods.

ullet According to your needs, we can negotiate and contract transportation for your merchandise, obtaining the best price and service.

- 5 - ullet Expand the Maquiladora program when assembling new products, including machinery and raw materials permits. ullet Provide information to the accounting department for the preparation of the SECOFI/INEGI questionnaire, whenever they are needed. D. HUMAN RESOURCES

ullet Recruitment, interviews and selection of personnel (candidate' s analysis, reference verification, general facts). ullet Develop files for each employee with the proper documentation, individual labor agreement, IMSS registration number, etc. ullet Induction of new personnel.

ullet Seniority acknowledgement letter, rights and obligations within the Labor Board.

ullet Development of policies and procedures manual (vacations, Christmas bonus, uniforms, safety equipment, work hours, breaks, etc.) ullet Direct communication with personnel and management to detect problems or concerns regarding salary, promotions with supervisor, leaders, etc.) ullet Social security: registration, interface employee/ company/ social security, modifications (salary, status, etc) ullet Weekly personnel report: turnover, absenteeism, personnel increase or decrease, promotions, personnel requirements, individual control. ullet Social and sport activities according to calendar: Rosca de Reyes, candies, barbecues, volley-ball and basquet-ball tournaments, children' s day, mother' s day, Halloween, Christmas party.

ullet Hygiene and. Safety: Integration of the Hygiene and Safety Commission, Safety or Hygiene courses from IMSS, company audits, the use of fire extinguishers, fire drills, monthly reports to the Labor Board, enforce of the Hygiene and Safety requirements. IVEMSA is liable to have established a pest control at the facility, which should be in force at least once monthly. ullet Monthly meetings: support general management preparing the different topics to be discussed, educational talks. ullet Filing for and attaining Mexican Immigration work permits (Any fees required are MASIMO responsibility). ullet Attend any conciliatory action exercised by a worker.


ullet At the initial stage, interface between MASIMO and the IVEMSA group

ullet Site selection assistance

ullet Building improvements coordination

ullet Coordination with the different departments (accounting, human resources and customs and traffic) to have the proper documentation and permits to begin operations.

ullet Assistance in filing for the Functioning License with the Baja California State Ecology Department (any fees required are MASIMO responsibility). ullet Assistance in acquiring any information required for the development of the project.

F. CAPITAL EQUIPMENT . While in IVEMSA' s possession, IVEMSA will maintain an accurate control log of all of MASIMO' s capital equipment and assets which will contain, but not be limited to:

1. Description of asset

2. Serial numbers

3. Model numbers and manufacturer.

4. Value, if available.

MASIMO agrees to provide IVEMSA with a list of all assets in order to facilitate this record keeping. A Bailment Agreement reflecting title and other pertinent information will be attached to this ocuments as Exhibit " B" MASIMO will have the obligation to pay for maintenance of the assets and equipment used in the services contracted hereunder. V. MANUFACTURING FACILITY TO BE PROVIDED BY IVEMSA. IVEMSA agrees to provide MASIMO, with a manufacturing facility under this agreement, and if the facility meets the following criteria, such facility will be guaranteed by MASIMO as may be provided for in the Lease Agreement and hereunder. Delays in starting operation due to lack of approval or guaranty for facility by MASIMO will not be a responsibility to IVEMSA.

A. The plant space shall be located in Mexicali, Baja California, Mexico or any other site mutually agreed upon by IVEMSA and MASIMO. B. The building will be inspected and pre-approved by MASIMO before any final purchase or lease contracts are signed.

- 7 - C. All MASIMO required improvements to the building will be made at MASIMO' s expense. All such improvements will be pre-approved in writing by MASIMO. D. IVEMSA agrees to make its best effort to expedite the start up of the plant in the most timely manner possible, further, MASIMO will exert its best efforts whenever its approval is required.

E. Rental payment will be the obligation of MASIMO or as may otherwise be agreed in this agreement, but at all times guaranteed by MASIMO. F. In the event IVEMSA does not want to be responsible for the lease agreement any more, a subrogation may take place, in which MASIMO will take the place of IVEMSA, appearing as Lessee. This situation shall be expressly allowed in the lease agreement .


A. MASIMIO will be responsible for the following:

1. All components, materials, supplies, tools, fixtures, workbenches, machines and data processing equipment necessary to produce MASIMO products. 2. All required office equipment, supplies and costs for on site MASIMO' s and IVEMSA personnel. 3. All required " product specific" safety supplies.

4. All required material handling equipment and packaging including pallets, containers and bags. 5. Insurance on building, equipment, transportation and materials provided, leased or guaranteed by MASIMO. The building insurance will not be in force whenever an act of nature or God takes place. The insurance on building refers in this paragraph shall only cover any damage arisen from the nature of the manufacturing activities and/or any material, chemical or product used. 6. Capital equipment maintenance.

7. Facility maintenance per the attached lease agreement.

8. Execution of Lease Agreement and/or guaranties therefore.

B. MASIMO will be responsible for payment of:

1. Any expenses incurred due to performance, on its own risk and expense, of any improvements needed to carry on in its operation.

- 8 - 2. Expenses for moving equipment.

3. Legal fees to incorporate the new company in Mexico, if MASIMO exercises its option to operate independently of IVEMSA. 4. Costs for U.S. duties on labor, materials and equipment during the term of this Agreement and extensions therefore, including final exportation due to termination of Agreement, shall be MASIMO' s responsibility. MASIMO will be the importer or record at U.S. Customs.

5. Facility and U.S. warehouse rent.

6. Expenses for electrical hookup and usage.

7. Expenses for telephone hookup and usage.

8. Expenses for water hookup and usage.

9. Purified drinking water, janitorial supplies, toilet supplies.

10. Hazardous waste disposal.

11. Miscellaneous: Trash collection, medical services (as established by the Mexican Labor Law and the Social Security Law), security services. 12. Any and all sums that are applicable under the terms of clause II, concerning labor liabilities. 13. U.S. and Mexican Custom' s Brokers Fees.

14. U.S. and Mexican duties, taxes and bonds.

15. Freight to and from Mexicali, Baja California.

16. Government licenses.

VII. PASS THROUGH COSTS. Pass Through Costs are any and all costs and expenses related to operation activities, labor payments and raw material, equipment and machinery guarding. All pass through expenses stipulated hereunder, that are paid by IVEMSA in Mexican Pesos will be billed to MASIMO in U.S. Dollars, currency of the United States of America, at the exchange rate in force at the billing date for the sale of dollars , in the Mexican Banking Institution with which IVEMSA operates regularly.

All pass-through expenses to be billed and paid by MASIMO mustbe regularly scheduled and set forth in a budget approved by MASIMO.

It is expressly understood and so agreed by MASIMO that upon signature of this Agreement, and prior to the initiation of services independently of the obligation set forth in the

- 9 -

following clause, MASIMO will deposit the amount indicated by IVEMSA which represents the initial amount to be disbursed by MASIMO for payroll. Such sum will be adjusted once the actual invoice for services corresponding to such period is produced and sent to MASIMO in a monthly basis.

VIII. INVOICING. Invoices for labor, indirect personnel, administrative fees and all other expenses to be paid by MASIMO shall be submitted by IVEMSA to MASIMO in accordance with the normal billing practices and invoiced by IVEMSA on a weekly basis to MASIMO to the Accounts Payable Department. Invoices shall be supported by documentation satisfactory to MASIMO and shall be approved by a MASIMO representative prior to payment.

MASIMO shall pay all invoices to an account designated in writing by IVEMSA. In the event of a dispute with respect to the charges submitted in an invoice, the undisputed portion of the invoice shall be paid by MASIMO within the terms specified herein, and payments of the disputed portion will be withheld pending resolution of such dispute. IVEMSA shall maintain accounts and complete records of all hours of direct labor employees engaged in the manufacturing for which payment under this agreement is to be computed on the basis of actual time paid, and charges of any kind payable by MASIMO under this agreement. Such records shall be maintained in accordance with recognized commercial accounting practices as to provide prompt and reasonable accounting information to MASIMO agreed hereunder. MASIMO has the right to audit records specific to MASIMO such as, but not limited to, payroll and time keeping records.


A. MASIMO will provide full assistance in the training of quality assurance, manufacturing and assembly personnel as well as providing clear and specific quality - control requirements and timely feedback on workmanship quality.

B. Any termination of seniority benefits required by Mexican law and owed to employees due to a special work force reduction requested by MASIMO will be paid by IVEMSA and billed to MASIMO at cost. IVEMSA will negotiate the lowest benefits payment possible and will provide MASIMO the opportunity to participate in such negotiations directly or through MASIMO appointed agent. MASIMO shall create a special fund for severance payments as stated, to be adjusted annually, the base for the severance includes the following:

a) Three months severance pay, (for unjustified layoffs according to Mexican Labor Law)

b) One day for every month of work completed,

c) Vacation and Christmas bonus time due,

d) If the layoffs are without justified cause according to article 47 of Mexican Labor Law, twenty days wages per year of seniority will be due.

- 10 -

The obligation to create a fund will be executed and complied with by means of an additional sum in an amount equal to ten percent of the weekly payroll that will be added to the invoice or billed separately as may be applicable under Mexican Tax Laws. The 10% as mentioned above will be paid until such time that it represents full payment of termination pay and benefits to all workers then hired, and shall continue to be updated if such becomes necessary due to increase in hand labor. Such obligation may be substituted by means of a bond sufficient to pay for termination of up to 70 (seventy) employees. Once such number of personnel is reached, MASIMO will substitute or increase the value of the bond to cover any additional number of workers hired or contemplated to be hired within a period of six months. Such bond shall be placed in favor of IVEMSA through a legal Mexican Institution authorized to issue such bonds.

Any amount integrated in the fund referred in this clause, shall be MASIMO' s property, even though the fund will be managed by IVEMSA. This fund shall be created through an account in a Bank Institution designated by IVEMSA, and any interest this account may earned, shall be on benefit of MASIMO. MASIMO shall deliver to IVEMSA prior to the initiation of services, evidence of any and all bonds, insurance or other documents to assure IVEMSA that all obligations have been complied with, within a period of thirty days as of the date of signature of this agreement, or immediately after following request by IVEMSA. not to exceed seven calendar days. C. Terms of payments of Administrative services billing is net seven days. Invoices can be telefaxed to MASIMO weekly to commence payment processing to the following fax number: (001) (949) 250-9686. Hard originals will follow by mail.

A deposit will be required in order to expedite the pre operation expenses payments, and a wire transfer will be required for the payment of pass - through expenses. Both the deposit and the wire transfer shall be made by MASIMO within ten (10) days following the enter of this agreement, at the bank institution called Wells Fargo Bank branch number 0275 addressed at 250 Fourth St. Calexico, CA. 92231, account number 219476272 and ABA number 121000248 at the name of Industrial Vallera de Mexicali, S.A. de C.V. MASIMO will send a written notification when a deposit would be made to this account, and IVEMSA will return to MASIMO either an invoice or Memo as proof of the receipt of the monies.

D. All U.S. Customs tariffs and Mexican duties and any similar payments to the government of the United States or Mexico under this Agreement shall be paid by MASIMO.

E. IVEMSA shall be responsible for obtaining all necessary city, state or federal Mexican importation and exportation permits needed to import and export equipment, production tools, raw materials and components into Mexico. IVEMSA agrees to assist MASIMO in gathering the proper information and documentation necessary for all permits. MASIMO agrees to supply to the best of its ability, all information required for such permits.

- 11 - X. COMMUNICATIONS. Both MASIMO and IVEMSA agree that clear communication lines between them are vital to this agreement. Accordingly, the following provisions are agreed upon:

A. All changes in this agreement or other subsequent agreements will be in writing and signed by the parties to this agr
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