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endo | 100 Endo Boulevard | Chadds Ford, Pennsylvania 19317 22
Pay Risk
At least on an annual basis, the Company’s management team conducts an assessment of the potential risks associ-
ated with the Company’s compensation arrangements, policies and practices. The assessments are then reviewed by the
Company’s Compensation Committee. A key objective is to determine whether the Company’s compensation policies and
practices create risks that are reasonably likely to have a material adverse effect on the Company. This risk assessment
process includes:
• A comprehensive review of compensation programs with the highest potential for material adverse effect;
• Identification of key Company positions and business areas that could potentially carry a significant portion of the
Company’s risk profile;
• Identification of compensation programs for the key Company positions and/or business areas;
• An analysis of employee compensation plans with the highest potential for risk pursuant to which we:
Identify the features within the plans that could potentially encourage excessive or imprudent risk taking;
Identify business risks that these features could potentially encourage;
Identify controls and plan features that mitigate the risks identified;
Determine residual risk remaining after having identified mitigating controls and features; and
Assess whether residual risk is reasonably likely to have a material adverse effect on the Company as a whole.
When reviewing the Company’s compensation programs, particular attention is paid to programs that allow for variable
payouts and consider whether there is the proper mix of performance metrics and that the plans reward both annual goal
achievement and the long-term sustainable success of the Company. In addition, the reviews focus on plans where an
employee might be able to influence payout factors and programs that involve our executives, with a focus on analyzing
whether any of the performance targets encourage excessive risk taking. During the assessments, several control and de-
sign features of the Company’s compensation program that are intended to mitigate the risk of excessive risk-taking are
evaluated.
Based on the process described above, it was concluded that the potential risks associated with the Company’s compensa-
tion policies and practices are not reasonably likely to have a material adverse effect on Endo. Management will continue
to review the Company’s compensation programs at least annually to identify and address potential risks that may have a
material adverse effect on the Company.
Compensation Components
The three principal components of the Company’s total
compensation are: base salary, annual cash incentive com-
pensation and equity-based LTI compensation. In allocating
compensation among these elements, we believe that the
majority of the compensation of our senior-most levels of
management—the levels of management having the great-
est ability to influence the Company’s performance—should
be performance-based, while lower levels of management
should receive a greater portion of their compensation in
base salary.
In making decisions with respect to any element of a named executive officer’s compensation, the Compensation Commit-
tee considers the total compensation that may be awarded to the officer, including salary, annual IC cash bonus and long-
term incentive compensation. In addition, in reviewing and approving employment agreements for NEOs, the Compensa-
tion Committee considers the other benefits to which the officer is entitled by the agreement, including compensation
payable upon termination of the agreement under a variety of circumstances. The Compensation Committee’s goal is to
award compensation that is competitive to attract and retain highly qualified leaders and motivate high business perfor-
mance. The Compensation Committee believes that its compensation programs align executive and shareholder interests
as well as vary compensation based on individual and Company performance.
Base Salary
Purpose. The objective of base salary is to reflect job responsibilities, value to the Company and individual performance
while taking into consideration market competitiveness. We seek to provide our executive officers with competitive an-
nual base salaries in order to attract and retain them. The base salary component of our executive officer compensation
program is not designed to incentivize our near-term performance (as performance-based cash bonuses are designed to
do), but rather to provide the baseline level of compensation to executive officers.
Considerations. Salaries for the NEOs are determined initially by each individual’s employment agreement which are de-
scribed under “Employment Agreements” below. These salaries and the amount of any increase over these salaries are
determined by the Compensation Committee based on a variety of factors, including:
• the nature and responsibility of the position and, to the extent available, salary norms for persons in comparable
positions at the Data Point Companies;
2011 Targeted Pay Mix
LTI
IC
Base
Salary
65%
19%
16%
David P.
Holveck
58%
15%
27%
Other
NEOs