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endo | 100 Endo Boulevard | Chadds Ford, Pennsylvania 19317 27
The respective equity-based LTI compensation target for each named executive
officer related to 2011, to be paid in early 2012, is reflected in the graph to the
right.
Further, Company and individual performance are considered in the awarding of
annual equity-based compensation to NEOs:
• Overall Company results versus Performance Scorecard. Company per-
formance is measured as described above in the “Assessment of Perfor-
mance-Based Annual Incentive Compensation.” Annual goals were set
in four categories, financial objectives, strategic achievement, portfolio
development and organization advancement objectives. At the end of the
performance year, an assessment is made of Company results versus
pre-determined objectives.
• Individual performance determined by assessing each named executive
officer’s achievements versus annual performance objectives. Regarding
individual performance, each named executive officer has annual performance objectives that contribute to the
growth and development of the Company. At the end of the performance year, each named executive officer is
assessed and given an overall performance rating. The final rating is then factored into the awarding of equity-
based compensation.
Based upon the achievement of Company goals and individual objectives, our President and Chief Executive Officer rec-
ommends an adjustment to each named executive officer’s target annual equity-based LTI compensation target based
upon performance related to key job accountabilities and annual performance objectives. The recommendation is then
reviewed by the Compensation Committee, which has discretion to modify the final award. Regarding the award for the
Company’s President and Chief Executive Officer, the Compensation Committee follows a similar process and has the
ultimate discretion for determining the annual equity award.
Discretion. Mr. Holveck’s employment agreement does not prescribe a specific LTI target but instead provides that his LTI
compensation will be determined at the sole discretion of the Compensation Committee if the Company and executive
achieve certain performance targets set by the Committee with respect to each year ending during Mr. Holveck’s em-
ployment term. All other NEOs are eligible to receive LTI compensation in an amount equal to a fixed percentage of their
annual base salary for such year (or such lesser (including zero) or greater percent of the base salary for such year as is
recommended to the Compensation Committee by the CEO and approved by the Compensation Committee).
Stock Options. The Company’s LTI compensation has historically taken the form of stock option awards. Stock options
reward NEOs only if the stock price increases.
The LTI program calls for stock options to be granted with exercise prices of not less than the closing price of our com-
mon stock as quoted on the NASDAQ on the date of grant and generally to vest ratably over four years based on contin-
ued employment. The Compensation Committee will not reduce the exercise price of stock options (except in connec-
tion with adjustments to reflect recapitalizations, stock or extraordinary dividends, stock splits, mergers, spin-offs and
similar events permitted by the relevant plan) without shareholder approval. New option grants to NEOs normally have
a term of ten years.
Performance Share Units. Beginning in 2010, PSU awards were and now continue to be granted annually, with each
award covering a three-year performance period. Through this program, senior leaders are eligible to earn a specified
target number of shares of Company stock at the end of the three-year performance period. The actual stock award is
paid out at the end of the three-year plan period depending on how well the Company performed against the targets set
at the beginning of the three-year program. This portion of the Company’s LTI program focuses the Company’s leaders
on delivering business performance over the next three years against certain key financial metrics that are designed
to drive long-term shareholder value as defined in each year’s performance award agreements. Specifically, for PSUs
granted in 2010 and 2011, the payouts are made in shares of common stock, with the actual number of shares awarded
dependent upon:
• the Company’s total shareholder return (TSR) performance over the performance period relative to the total
shareholder return performance of the NASDAQ Biotechnology Index (the TSR Stock Award); and
• cumulative net sales over the performance period (the Net Sales Stock Award).
Julie H.McHugh David P.Holveck
400%
250%
200% 200% 200%
Alan G.Levin Ivan P.Gergel, M.D.Caroline B.Manogue
% of Annual Base Salary
TSR
50% Net Sales50%