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endo | 100 Endo Boulevard | Chadds Ford, Pennsylvania 19317 24
These two steps are further described below:
(1) Setting Company performance goals. Early in each year, the Compensation Committee, working with senior
management, sets performance goals for the Company. The bonus determination for each NEO was primar-
ily based upon the Company’s performance against these goals. The goals that were established for 2011 are
discussed below under “2011 Decisions Regarding Incentive Compensation.” In determining the extent to which
the pre-set performance goals are met for a given period, the Compensation Committee exercises its judgment
whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infre-
quently occurring events reported in the Company’s public filings.
(2) Measuring performance. After the end of the year, the Compensation Committee reviews the Company’s actual
performance against each of the performance goals established at the outset of the year. The Compensation
Committee assesses the Company’s performance as well as each NEO’s performance against the individual
goals set at the outset of the year. This assessment allows bonus decisions to take into account overall Company
performance and each NEO’s personal performance and contribution during the year.
Discretion. Under the IC program, the Compensation Committee has discretion, in appropriate circumstances (e.g., should
the individual’s performance in any particular year be evaluated as outstanding), to pay incentive compensation at less
than or in excess of target levels, but no more than the lesser of 1) the maximum aggregate amount of the annual incen-
tive pool based on a pre-established fixed percentage of consolidated adjusted net income or 2) a maximum individual
amount of $3,000,000 for the President and Chief Executive Officer and three other highest-paid executive officers (not
including the Company’s Executive Vice President & Chief Financial Officer), which is the amount approved by sharehold-
ers in accordance with IRC 162(m) of the Internal Revenue Code under Endo’s 2010 Stock Incentive Plan. Further, pursu-
ant to each of our NEOs’ employment agreements, target IC as a percentage of annual base salary may subsequently be
increased at the discretion of the Compensation Committee. Accordingly, in February 2011, as presented for consider-
ation to the Compensation Committee by Hay Group following an analysis showing competitive Chief Executive Officer
compensation among the Data Point Companies, as well as the position of the President and Chief Executive Officer in
relation to other senior company executives, the Compensation Committee increased Mr. Holveck’s IC target from 100%
to 120% of his annual base salary, which was reflected in the IC payments related to 2011 that were paid in early 2012.
2011 Decisions Regarding Incentive Compensation. The following information summarizes the components of the Company’s
IC program and the basis for the actual award granted by the Compensation Committee for 2011. With respect to 2011,
the annual award to each of the NEOs was based on the achievement of corporate goals as well as each NEO’s individual
performance and demonstrated leadership. The Compensation Committee established corporate performance goals for
2011, placing emphasis on the Company’s most important strategic and operating objectives. For 2011, the IC weightings
were recalibrated to place additional emphasis on business development and integration activities. The performance
goals were weighted as follows (specific targets are discussed in the following section heading “2011 Company Perfor-
mance Against Objectives”):
The above “scorecard” is calibrated so that results will generally range between 50% and 150% of target award oppor-
tunity, commensurate with performance. The stretch (150%) and threshold (50%) goals are set so that the Company’s
financial performance achieved in each scenario will appropriately fund the cost of the cash incentives. The Compensa-
tion Committee, however, has the discretion to withhold annual cash incentives that otherwise would be made to any
employees, including the NEOs, if it determines, either on a quantitative or a qualitative basis, that overall performance
is too low. Moreover, the scorecard achievements are assessed based on whether the Company achieved the scorecard
results considering (1) current healthcare compliance as reflected by a robust internal compliance program and as de-
termined by outcomes of regulatory review and inspections, such as those of the Food and Drug Administration, and (2)
progress on health and safety outcomes as determined by other regulatory and environmental matters.
Financial Objectives, which included achieving an annual total revenue goal, as well as a
targeted adjusted diluted earnings per share (EPS) goal
Strategic Achievement, which included executing the Company’s strategic imperatives and
enterprise objectives in building a sustainable growth business
Portfolio Development, which included the evaluation, and where appropriate, the
advancement of the Company’s internal portfolio and adding to the Company’s current
portfolio both through acquisitions and licensing transactions, in each case aligned with the
strategic direction of the business
Organizational Advancement, which included achieving portfolio, cost and organizational
integration goals, appropriately enhancing the Company’s leadership effectiveness with a
focus on building the Company’s talent pipeline, enhancing systems and controls, regulatory
compliance, and improving the Company’s organization capabilities and efficiencies
40%
40%
10%
10%