Page 34 - EndoProxy2012

endo

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100 Endo Boulevard

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Chadds Ford, Pennsylvania 19317

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For PSUs granted in 2012, TSR performance will be measured relative to the S&P 1500 Health Care Index instead of the

NASDAQ Biotechnology Index, reflecting our continuing transition to a broader healthcare solutions company.

The number of PSUs awarded to each executive is based on a targeted percentage of the executive’s base salary with

the actual number of shares awarded adjusted to between zero and 200% of the target award amount based upon

achievement of pre-determined TSR performance and cumulative net sales goals. PSUs are designed to encourage and

reward our executives for achieving longer-term financial goals as well as meeting or exceeding the relative financial

performance of our industry group.

In February 2012, the Compensation Committee reviewed and approved measures and target performance levels for

the 2012–2014 performance period and awarded PSUs to its NEOs. The performance period for these awards began on

January 1, 2012 and ends on December 31, 2014. Payouts with respect to these PSUs, if any, will be made in shares of

Company common stock in February 2015, following the close of the three-year performance cycle. In determining the

extent to which the pre-set performance measures are met for a given period, the Compensation Committee may exer-

cise its judgment whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual

or infrequently occurring events reported in the Company’s public filings.

Holders of PSUs will be entitled to receive a number of

shares of Company common stock as of December 31,

2014 equal to a multiple of the TSR Stock Award based

on the Company’s relative Total Shareholder Return (as

specifically defined below) for the performance period as

compared to the Total Shareholder Return for the per-

formance period of companies comprising the S&P 1500

Health Care Index as of the last day of the performance

period, in accordance with the graph to the left; provided,

however, that, notwithstanding the graph to the left, no

portion of the TSR Stock Award shall vest if the Compa-

ny’s Total Shareholder Return for the performance period

is negative.

“Total Shareholder Return”

shall mean the appreciation of

the Per Share Price during the performance period, plus

any dividends paid on the applicable company’s common

stock during such performance period.

“Per Share Price”

shall mean the average of the closing prices of common shares for the applicable company during the

eighty (80) consecutive trading days ending on the day prior to the applicable measurement date.

Holders of PSUs will be entitled to receive a

number of shares of Company common stock

as of December 31, 2014 equal to a multiple of

the Net Sales Stock Award based on the Com-

pany’s cumulative Net Sales (as specifically

defined below) for the performance period as

compared to the Company’s target Net Sales

in accordance with the graph to the right.

In setting the Company’s cumulative Net

Sales target, the Compensation Commit-

tee considers several factors, including the

Company’s three-year organic sales growth

projections, new product introductions, and

incremental revenues associated with new

business opportunities. For any payout to oc-

cur for the portion of the program related to

cumulative Net Sales, significant Net Sales

growth must be achieved relative to the actual

Net Sales for the year preceding the perfor-

mance period.

“Net Sales”

shall mean the revenues from the Company’s sales (including, but not limited to, sales of the Company’s phar-

maceutical products, devices and services) plus royalties and other payments earned from third parties as a result of

licensing activities and royalties earned on sales of the underlying products, as recognized in accordance with account-

ุ

105%

Multiple of the Target N

et

Sales Stock Award

2.00x

1.75x

1.50x

1.25x

1.00x

0.75x

0.50x

0.25x

0.00x

Cumulative Target Net Sales

ุ

103%

but

105%

ุ

102%

but

103%

ุ

101%

but

102%

ุ

99%

but

101%

ุ

98%

but

99%

ุ

97%

but

98%

ุ

95%

but

97%

95%

90th

to99th

Multiple of the Target

TSR Stock Award

80th

to89th

70th

to 79th

60th

to69th

50th

to 59th

40th

to49th

Below