PRE 14A
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UNITED STATES SECURITY AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF

THE SECURITIES EXCHANGE ACT OF 1934

(AMENDMENT NO. )

 

x

 

Filed by the Registrant

 

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Filed by a Party other than the Registrant

Check the appropriate box:

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Preliminary Proxy Statement

¨

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)).

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material Pursuant to Section 240.14a-12

 

  Endo International plc

(Name of Registrant as Specified in Its Charter)

 

         

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

 

Payment of Filing Fee (check the appropriate box):

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

 

 

Title of each class of securities to which transaction applies

 

 

 

 

 

(2)

 

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(3)

 

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined)

 

 

 

 

 

(4)

 

Proposed maximum aggregate value of transaction

 

 

 

 

 

(5)

 

Total fee paid

 

 

 

 

 

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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

 

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(2)

 

Form, Schedule or Registration Statement No.

 

 

 

 

 

(3)

 

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(4)

 

Date Filed

 

 

 

 


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LOGO

 

 

  2016      

Notice of the

2016 Annual

General Meeting

of Shareholders

and Proxy Statement

 

 

 

 

 

 

June 7, 2016 at 10:00 a.m. local time

Endo International plc

First Floor Minerva House Simmonscourt Road Ballsbridge Dublin 4, Ireland

endo.com


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LOGO

        

Endo International plc

 

First Floor

 

Minerva House

 

Simmonscourt Road

 

Ballsbridge

 

Dublin 4, Ireland

 

endo.com

 

 

    LOGO        

 

 

Endo International plc is a global specialty pharmaceutical company focused on improving

the lives of patients while creating value.

Dear Fellow Endo International plc Shareholder:

It is my pleasure to invite you to the Annual General Meeting of Shareholders of Endo International plc (the Company), which will be held on June 7, 2016 at 10:00 a.m., local time, at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

At the meeting, we will be electing by separate resolutions nine members of our Board of Directors, voting to approve the selection of PricewaterhouseCoopers LLP as our independent auditor and to authorize the Audit Committee of the Board of Directors to determine the auditors’ remuneration, conducting an advisory vote on the compensation of our named executive officers, voting to approve the amendment of the Company’s Memorandum of Association, voting to approve the amendment of the Company’s Articles of Association and voting to approve the amendment of the Company’s 2015 Stock Incentive Plan. During the Annual General Meeting, we will also review the Company’s 2015 Irish statutory financial statements. In addition to these formal items of business, we will report on our Company’s performance.

We look forward to seeing you at the Annual General Meeting should you be able to attend.

Your vote is important. Whether you plan to attend the meeting or not, we encourage you to read this Proxy Statement and vote your shares. Please vote by promptly completing and returning your proxy by internet, by mail or by attending the Annual General Meeting and voting in person by ballot. You may revoke your proxy at any time before it is exercised as explained in this Proxy Statement.

Thank you for your continued interest in Endo.

Very truly yours,

 

LOGO

RAJIV DE SILVA

President and Chief Executive Officer

Dublin, Ireland

April 29, 2016

Endo International plc,

Registered Office: First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland

Registered in Ireland: number—534814

Directors: Roger Hartley Kimmel (USA), Rajiv Kanishka Liyanaarchchie De Silva (USA), Shane Martin Cooke (Ireland),

Arthur Joseph Higgins (USA), Nancy June Hutson (USA), Michael Hyatt (USA), William Patrick Montague (USA),

Jill Deborah Smith (USA), William Frederick Spengler (USA).


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LOGO

        

Endo International plc

 

First Floor

 

Minerva House

 

Simmonscourt Road

 

Ballsbridge

 

Dublin 4, Ireland

 

endo.com

 

LOGO

TO BE HELD ON JUNE 7, 2016

10:00 a.m., Local Time

First Floor, Minerva House,

Simmonscourt Road, Ballsbridge, Dublin 4, Ireland

Notice is hereby given that the 2016 Annual General Meeting of Shareholders (the Annual Meeting) of Endo International plc, an Irish public limited company, will be held on June 7, 2016 at 10:00 a.m., local time, at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

The purposes of the meeting are:

 

(1)

To elect by separate resolutions nine directors, representing all of the members of the Board of Directors of the Company, to serve until the next Annual Meeting;

 

(2)

To approve the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for the year ending December 31, 2016 and to authorize the Audit Committee of the Board of Directors to determine the auditors’ remuneration;

 

(3)

To conduct an advisory vote on the compensation of our named executive officers;

 

(4)

To approve the amendment of the Company’s Memorandum of Association;

 

(5)

To approve the amendment of the Company’s Articles of Association;

 

(6)

To approve the amendment of the Company’s 2015 Stock Incentive Plan; and

 

(7)

To act upon such other matters as may properly come before the Annual Meeting or any adjournment or postponement thereof.

These proposals, other than proposals (4) and (5), are ordinary resolutions requiring a simple majority of the votes cast at the meeting. Proposals (4) and (5) are special resolutions requiring the approval of 75% of the votes cast at the meeting. All proposals are more fully described in this proxy statement.

The Company’s Irish statutory financial statements for the fiscal year ended December 31, 2015, including the reports of the directors and auditors thereon, will be presented at the Annual Meeting. There is no requirement under Irish law that such statements be approved by the shareholders, and no such approval will be sought at the Annual Meeting. The Annual Meeting will also include a review by the members of the Company’s affairs.

Only shareholders of record at the close of business on April 14, 2016 are entitled to notice of and to vote at the 2016 Annual Meeting and any adjournment thereof.

This year, we have elected to furnish proxy materials to our shareholders electronically so that we can both provide our shareholders with the information they need and also reduce our costs of printing and delivery and the environmental impact of our Annual Meeting.

It is important that your shares be represented and voted at the Annual Meeting. Please vote by promptly completing and returning your proxy by internet, by mail or by attending the Annual Meeting and voting in person by ballot, so that


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whether you intend to be present at the Annual Meeting or not, your shares can be voted. Returning your proxy will not limit your rights to attend or vote at the Annual Meeting.

If you are a shareholder who is entitled to attend and vote, then you are entitled to appoint a proxy or proxies to attend and vote on your behalf. A proxy is not required to be a shareholder in the Company. If you wish to appoint as proxy any person other than the individuals specified on the proxy card, please specify the name(s) and address of such person(s) in the proxy card. Proxy cards to be valid must be received at Endo International plc, First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland by [X] on [X] 2016.

In addition to the above notice of the Annual General Meeting, the Board would like to draw your attention to the following notice concerning a proposed change to the Financial Reporting Standards used in the preparation of the financial statements of the ultimate holding company, Endo International plc.

Adoption of New Financial Reporting Standards

The Company prepares its stand-alone parent entity Irish statutory financial statements consistent with Irish generally accepted accounting principles (Irish GAAP). During the year ending December 31, 2015, Endo International plc adopted FRS 101 “Reduced Disclosure Framework”.

By order of the Board of Directors,

 

LOGO

Orla Dunlea

Company Secretary

Dublin, Ireland

April 29, 2016

Endo International plc

Registered Office: First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland

Registered in Ireland: number—534814

Directors: Roger Hartley Kimmel (USA), Rajiv Kanishka Liyanaarchchie De Silva (USA), Shane Martin Cooke (Ireland), Arthur Joseph Higgins (USA), Nancy June Hutson (USA), Michael Hyatt (USA), William Patrick Montague (USA), Jill Deborah Smith (USA), William Frederick Spengler (USA).


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LOGO

Proxy Statement for 2016 Annual General Meeting

of Shareholders

 

 

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General Information

     1   

Annual General Meeting Admission

     1   

Shareholders Entitled to Vote

     1   

How to Vote if You Are a Shareholder of Record

     1   

Electronic Access to Investor Information

     2   

General Information on Voting and Required Vote

     2   

Proposal 1: Election of Directors

     3   

Proposal 2: Approval of Appointment of Independent Registered Public Accounting Firm

     13   

Proposal 3: Advisory Vote on the Compensation of Our Named Executive Officers (“Say-on-Pay Vote”)

     15   

Proposal 4: Approval of the Amended Memorandum of Association

     17   

Proposal 5: Approval of the Amended Articles of Association

     17   

Proposal 6: Approval of an Amendment to the 2015 Stock Incentive Plan

     20   

Compensation Discussion and Analysis

     25   

Compensation of Executive Officers and Directors

     48   

Other Information Regarding the Company

     58   

No Dissenters’ Rights

     60   

Other Matters

     60   

Annual Report/Form 10-K

     60   

Shareholder Proposals for the 2017 Annual General Meeting

     60   

Annex 1

     A-1   

Annex 2

     A-2   

Annex 3

     A-3   


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General Information

We are providing these proxy materials in connection with the solicitation by the Board of Directors of Endo International plc, an Irish public limited company, of proxies to be voted at our 2016 Annual General Meeting or Annual Meeting to be held on June 7, 2016, beginning at 10:00 a.m., local time. The Annual Meeting will be held at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

In accordance with the rules of the Securities and Exchange Commission, we are furnishing our proxy materials (Proxy Statement for Annual Meeting, 2015 Annual Report to Shareholders, 2015 Endo International plc Form 10-K and 2015 Irish Statutory Financial Statements) by providing access to these materials electronically on the internet. As such, we are not mailing a printed copy of our proxy materials to each shareholder of record or beneficial owner, and our shareholders will not receive printed copies of the proxy materials unless they request this form of delivery. Printed copies will be provided upon request at no charge.

We are mailing a Notice of Meeting and Internet Availability of Proxy Materials (Notice of Internet Availability) to our shareholders on or about April 29, 2016. This Notice of Internet Availability is in lieu of mailing the printed proxy materials, and contains instructions for our shareholders as to how they may: (1) access and review our proxy materials on the internet; (2) submit their proxy; and (3) receive printed proxy materials. Shareholders may request to receive printed proxy materials by mail or electronically by e-mail on an ongoing basis by following the instructions in the Notice of Internet Availability. We believe that providing future proxy materials electronically will enable us to save costs associated with printing and delivering the materials and reduce the environmental impact of our annual meetings. A request to receive proxy materials in printed form by mail or by e-mail will remain in effect until such time as the shareholder elects to terminate it.

Unless otherwise indicated or the context otherwise requires, references in this proxy statement to “Endo,” “the Company,” “we,” “us,” and “our” refer to Endo International plc and its consolidated subsidiaries.

 

 

Annual Meeting Admission

Shareholders must present a form of personal identification in order to be admitted to the Annual Meeting. For directions to the Annual Meeting, visit www.endo.com/about-us/locations.

No cameras, recording equipment or electronic devices will be permitted in the Annual Meeting.

 

Shareholders Entitled to Vote

Holders of ordinary shares at the close of business on April 14, 2016 (the record date), are entitled to receive this notice and to vote their shares at the Annual Meeting. As of that date, there were [X] issued ordinary shares of Endo entitled to vote.

Each ordinary share is entitled to one vote on each matter properly brought before the Annual Meeting. Your proxy indicates the number of votes you have.

 

 

How to Vote if You Are a Shareholder of Record

 

Your vote is important. Shareholders of record can vote by internet, by mail or by attending the Annual Meeting and voting in person by ballot as described below.

Vote by Internet

If you choose to vote by internet, visit www.proxyvote.com, enter the control number found on the Notice of Internet Availability and follow the steps outlined on the secure website.

Vote by Mail

You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. If you choose to vote by mail, simply complete your proxy card, date and sign it, and return it in the postage-paid envelope provided.

Vote at the Annual Meeting

Voting by internet or mail will not limit your right to vote at the Annual Meeting if you decide to attend in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the Annual Meeting.

All shares that have been properly voted and not revoked will be voted at the Annual Meeting. If you execute your proxy but do not give voting instructions, the shares represented by that proxy will be voted FOR each of the nominees for election as director, FOR the approval of the appointment of PricewaterhouseCoopers as the Company’s independent auditors for the year ending December 31, 2016 and to authorize the Audit Committee of the Board of Directors to determine the auditors’ remuneration, FOR the approval, on an advisory basis, of the compensation to be paid to Endo’s named executive officers, FOR the approval of the amendment of the Company’s Memorandum of Association, FOR the approval of the amendment of the Company’s Articles of Association and FOR the approval of the amendment of the Company’s 2015 Stock Incentive Plan.

 

 

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Electronic Access to Investor Information

 

 

Endo’s Proxy Statement and other investor information are available on our Company’s website at www.endo.com, under “Investors”. You can also access the Investor page of our website by scanning the QR code to the right with your smartphone.

 

LOGO

 

 

General Information on Voting and Required Vote

You are entitled to cast one vote for each ordinary share of Endo you own on the record date. Provided that a quorum is present, (1) in order for a nominee to be elected as a director, (2) the approval of the appointment of the Company’s independent auditor and the authorization of the Audit Committee of the Board of Directors to fix the auditors’ remuneration (3) the approval, on an advisory basis, of the compensation to be paid to Endo’s named executive officers and (4) the approval of the amendment of the Company’s 2015 Stock Incentive Plan will each require the majority of the votes cast at the Annual Meeting in person or by proxy. Provided that a quorum is present, (1) the approval of the amendment of the Company’s Memorandum of Association and (2) the approval of the amendment of the Company’s Articles of Association will each require 75% of the votes cast at the Annual Meeting in person or by proxy.

The presence of the holders of a majority of the issued ordinary shares as of the record date entitled to vote at the Annual Meeting, present in person or represented by proxy, is necessary to constitute a quorum. Shares represented by a proxy marked “abstain” on any matter will be considered present at the Annual Meeting for purposes of determining a quorum. Abstentions will not be considered votes cast at the Annual Meeting. The practical effect of this is that abstentions are not voted in respect of these proposals. Shares represented by a proxy as to which there is a “broker non-vote” (for example, where a broker does not have the discretionary authority to vote the shares), will be considered present for the Annual Meeting for purposes of determining a quorum, and will not have any effect on the outcome of voting on the proposals.

All ordinary shares that have been properly voted and not revoked, will be voted at the Annual Meeting in accordance with your instructions. If you execute the proxy but do not give voting instructions, the ordinary shares represented by that proxy will be voted FOR each of the nominees for election as director, FOR the approval of the appointment of PricewaterhouseCoopers as the Company’s independent auditors for the year ending December 31, 2016 and to authorize the audit committee of the Board of Directors to determine the auditors’ remuneration, FOR the approval, on an advisory basis, of the compensation to be paid to Endo’s named executive officers, FOR the approval of the amendment of the Company’s Memorandum of Association, FOR the approval of the amendment of the Company’s Articles of Association and FOR the approval of the amendment of the Company’s 2015 Stock Incentive Plan.

Voting on Other Matters

If other matters are properly presented at the Annual Meeting for consideration, the persons named in the proxy will have the discretion to vote on those matters for you. At the date the Company began printing this Proxy Statement, no other matters had been raised for consideration at the Annual Meeting.

How You May Revoke or Change Your Vote

You can revoke your proxy at any time before it is voted at the Annual Meeting by:

  ¡  

sending written notice of revocation to the Company Secretary;

  ¡  

timely delivering a valid, later-dated proxy; or

  ¡  

attending the Annual Meeting and voting in person. If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor from the holder of record, to be able to vote at the meeting.

List of Shareholders

The names of shareholders of record entitled to vote at the Annual Meeting will be available at the Annual Meeting and for ten days prior to the Annual Meeting for any purpose germane to the meeting, between the hours of 8:45 a.m. and 4:30 p.m., at our registered office at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

Cost of Proxy Solicitation

The Company will pay for preparing, printing and mailing this Proxy Statement and we will pay for the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees in person or by telephone, electronic transmission and facsimile transmission. The Company will reimburse banks, brokers and other custodians, nominees and fiduciaries for their reasonable out-of-pocket costs of sending the proxy materials to our beneficial owners. We have also retained Innisfree M&A Inc. to assist in soliciting proxies. We will pay Innisfree M&A Inc. a base fee of approximately $25,000 plus reasonable out-of-pocket expenses for these services.

 

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Presentation of Irish Statutory Financial Statements

The Company’s Irish statutory financial statements for the fiscal year ended December 31, 2015, including the reports of the directors and auditors thereon, will be presented at the Annual Meeting. There is no requirement under Irish law that such financial statements be approved by shareholders, and no such approval will be sought at the Annual Meeting. The Company’s 2015 Irish statutory financial statements are available with the Proxy Statement for Annual Meeting, 2015 Annual Report to Shareholders, 2015 Endo International plc Form 10-K and other proxy materials at www.proxyvote.com.

 

 

Proposal 1: Election of Directors

The Board of Directors

The Company’s Memorandum and Articles of Association provides that the number of directors of the Company shall be not less than five nor more than twelve, the exact number of which shall be fixed from time to the time by resolution of the Board of Directors or by a resolution adopted by holders of a majority of the Company’s ordinary shares. On April 28, 2015, Mr. Delucca informed the Board of Directors that he would not stand for re-election at the 2015 Annual Meeting. The Board has not filled the vacancy left by Mr. Delucca’s departure and has fixed the directors at nine effective June 9, 2015, the date of the 2015 Annual Meeting.

Under the terms of the Company’s Memorandum and Articles of Association, directors need not be shareholders of the Company or residents of Ireland. However, pursuant to the Stock Ownership Guidelines approved by the Board of Directors, each non-employee Director should, but is not required to, have ownership of the Company’s ordinary shares equal in value to at least five times his or her current annual cash retainer to be achieved within five years of joining the Board, or in the case of non-employee Directors serving at the time the Ownership Guidelines were adopted, within five years of the date of the adoption, or December 10, 2015, as further described in the section titled “Common Stock Ownership Guidelines”. Directors are elected for a one-year term and shall retire from office unless re-elected by ordinary resolution at the next following Annual General Meeting. Non-employee Directors receive compensation for their services as determined by the Board of Directors. See “COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS — 2015 Compensation of Non-Employee Directors.” A vacancy on the Board, or a newly created directorship resulting from any increase in the authorized number of directors, may be filled by a majority of the directors then in office, even though less than a quorum remains. A director appointed to fill a vacancy remains a director until the next following Annual Meeting or his or her earlier death, resignation or removal.

Currently, the Board of Directors consists of nine members. Currently serving as directors are Roger H. Kimmel, Rajiv De Silva, Shane M. Cooke, Arthur J. Higgins, Nancy J. Hutson, Ph.D., Michael Hyatt, William P. Montague, Jill D. Smith and William F. Spengler. On April 28, 2015, Mr. Delucca resigned from the Company’s Board of Directors effective June 9, 2015. All of the current members are nominated by the Board of Directors of the Company for the election as directors of the Company.

The Board annually determines the independence of directors based on a review by the directors and the Nominating & Governance Committee. No director is considered independent unless the Board of Directors has determined that he or she has no material relationship with the Company, either directly or as a partner, shareholder or officer of an organization that has a material relationship with the Company. Material relationships can include commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships, among others. To evaluate the materiality of any such relationship, the Board has adopted categorical independence standards consistent with the NASDAQ Exchange listing guidelines. These standards are available on the Company’s website at www.endo.com, under “Investors-Corporate Governance-Nominating & Governance Committee.”

Members of the Audit, Compensation, and Nominating & Governance Committees must meet applicable independence tests of the NASDAQ.

The Board of Directors has affirmatively determined that eight of its nine current members are independent directors under the NASDAQ rules and regulations. The eight independent directors under the NASDAQ rules and regulations are Messrs. Kimmel, Cooke, Higgins, Hyatt, Montague, and Spengler, Dr. Hutson and Ms. Smith. If the nominees recommended by the Board of Directors are elected at the 2016 Annual Meeting, eight of the Company’s nine directors will be independent directors under the NASDAQ rules and regulations. Mr. De Silva is not independent due to his role as President and Chief Executive Officer.

On an annual basis and upon the nomination of any new director, the Nominating & Governance Committee and the Board review directors’ responses to a questionnaire asking about their relationships with the Company (and those of their immediate family members) and other potential conflicts of interest. The Nominating & Governance Committee has determined that the nine non-employee directors currently serving are independent, and that the members of the Audit, Compensation, and Nominating & Governance Committees also meet the independence tests referenced above. Specifically, the Nominating & Governance Committee and the Board have determined that all non-employee directors have not had during the last three years (i) any of the relationships listed above or (ii) any other material relationship with the Company that would compromise his or her independence. The Nominating & Governance Committee recommended this determination to the Board of Directors and explained the basis for its decision, and this determination was adopted by the full Board.

 

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As of the date of this Proxy Statement, there are no material proceedings to which any director or executive officer of the Company, or any associate thereof, is a party that are adverse to the Company or any of its subsidiaries.

Between January 1, 2015 and December 31, 2015, the Board of Directors of the Company as a whole met nine times and did not act by written consent. All members of the Board of Directors who are standing for election attended at least 75% of the Board meetings held during their respective terms and at least 75% of the combined meetings of the Committees of the Board of Directors on which they served in 2015.

Nominees

There are nine nominees for election as directors of the Company to serve until the 2017 Annual General Meeting of Shareholders of the Company or until his/her earlier death, resignation or removal. All of the nominees are currently serving as directors of the Company. In addition, the nine nominees were elected to the Board at the last Annual Meeting.

The proposed nominees for election as directors have confirmed that they are each willing to serve as directors of the Company. If, as a result of circumstances not now known or foreseen, a nominee shall be unavailable or unwilling to serve as a director, an alternate nominee may be designated by the present Board of Directors to fill the vacancy.

The Board believes that each of the Company’s directors is highly qualified to serve as a member of the Board and each has contributed to the mix of skills, core competencies and qualifications of the Board. When evaluating candidates for election to the Board,  the  Nominating  &  Governance  Committee  seeks  candidates  with certain qualities that it believes are important,

 

Set forth below are
summaries of the back
ground, business
experience and descrip
tions of the princi
pal occupation of
each of the Company’s
current directors:

  

including experience, skills, expertise, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest, those criteria and qualifications described in each director’s biography below and such other relevant factors that the Nominating & Governance Committee considers appropriate in the context of the needs of the Board of Directors. Although not specified in the charter, the Committee also considers ethnicity and gender when selecting candidates so that additional diversity may be represented on the Board. Our directors are highly experienced and have diverse backgrounds and skills as well as extensive track records of success in what we believe are highly relevant positions. The Board believes that each director’s service as the Chairman, Vice Chairman, President and Chief Executive Officer, Executive Vice President & Chief Financial Officer or Senior Executive of significant companies has provided the directors with skills that are important to serving on our Board.

 

 

 

 

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ROGER H. KIMMEL, 69, is Chairman of the Board of Endo and is Chairman of Endo’s Nominating & Governance Committee, a member of Endo’s Transactions Committee and an alternate member of Endo’s Audit Committee and Operations Committee. Mr. Kimmel became Chairman of the Board upon the Company’s inception in February 2014. Mr. Kimmel has been Vice Chairman of Rothschild Inc., an investment banking firm, since January 2001. Previously, Mr. Kimmel was a partner of the law firm Latham & Watkins for more than five years. Mr. Kimmel is also a Director of PG&E Corporation, a public energy-based holding company and its subsidiary Pacific Gas and Electric Company, a utility company. Mr. Kimmel was a Director of Schiff Nutrition International until 2012, and until February 2014, was a Director and Chairman of Endo Health Solutions Inc. Mr. Kimmel served as Chairman of the Board of Trustees of the University of Virginia Law School Foundation (not-for-profit) from January 2009 to June 30, 2015. He has been a public speaker on corporate governance issues and private equity transactions.

LOGO     

RAJIV DE SILVA, 49, is President, Chief Executive Officer and a Director of Endo. Prior to joining Endo in March 2013, Mr. De Silva served as the President of Valeant Pharmaceuticals International, Inc. from October 2010 to January 2013 and served as its Chief Operating Officer, Specialty Pharmaceuticals from January 2009 until January 2013. He was responsible for all specialty pharmaceutical operations, including sales and marketing, research and development, manufacturing and business development. He has broad international experience, having managed businesses in the United States, Europe, Canada, Latin America, Asia, South Africa and Australia/New Zealand. Prior to joining Valeant, Mr. De Silva held various leadership positions with Novartis. He served as President of Novartis Vaccines USA and Head, Vaccines of the Americas at Novartis. During this time, he played a key leadership role at Novartis’ Vaccines & Diagnostics Division. Mr. De Silva also served as President of Novartis Pharmaceuticals Canada. He originally joined Novartis as Global Head of Strategic Planning for Novartis Pharma AG in Basel, Switzerland. Prior to his time at Novartis, Mr. De Silva was a Principal at McKinsey & Company and served as a member of the leadership group of its Pharmaceuticals and Medical Products Practice. Mr. De Silva was a Director of AMAG Pharmaceuticals, Inc. and is currently a Member of the Board of Trustees at Kent Place School in Summit, NJ. He holds a Bachelor of Science in Engineering, Honors from Princeton University, and a Master of Science from Stanford University and a Master of Business Administration with Distinction from the Wharton School at the University of Pennsylvania.

 

 

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SHANE M. COOKE, 53, was appointed to the Board of Directors in July 2014 and is a member of Endo’s Audit Committee and Transactions Committee. He is currently President of Alkermes plc based in Dublin, Ireland upon completion of the merger between Elan Drug Technologies (EDT) and Alkermes, Inc. in September 2011. Previously, he was head of EDT and executive vice president of Elan from 2007 through the Alkermes merger in 2011 and concurrently served as chief financial officer of Elan Corporation from 2001 to May 2011. Mr. Cooke was appointed director of Elan in May 2005. Prior to joining Elan, he was chief executive of Pembroke Capital Limited, an aviation leasing company of which he was a founder. Mr. Cooke also previously held a number of senior positions in finance in the banking and aviation industries. Mr. Cooke is a chartered accountant and a graduate of University College Dublin, Ireland. He currently serves on the board of directors of Prothena Corporation plc.

   LOGO  

ARTHUR J. HIGGINS, 60, has been a member of the Board of Directors since the Company’s inception in February 2014 and is a member of Endo’s Compensation Committee, Operations Committee and Transactions Committee. He is currently a Senior Advisor to Blackstone Healthcare Partners, the dedicated healthcare team of The Blackstone Group, where he focuses on product-based healthcare acquisitions. Mr. Higgins was Chairman of the Board of Management of Bayer HealthCare AG, and Chairman of the Bayer HealthCare Executive Committee. Prior to joining Bayer HealthCare in 2004, Mr. Higgins served as Chairman, President and CEO of Enzon Pharmaceuticals, Inc. from 2001 to 2004. Prior to joining Enzon Pharmaceuticals, Mr. Higgins spent 14 years with Abbott Laboratories, including serving as President of the Pharmaceutical Products Division from 1998 to 2001. Mr. Higgins is a Director of Ecolab, Inc. and Zimmer Holdings, Inc., public companies in the healthcare field. From December 2013 until February 2014, Mr. Higgins was a Director of Endo Health Solutions Inc. He is a past member of the Board of Directors of the Pharmaceutical Research and Manufacturers of America (PhRMA), of the Council of the International Federation of Pharmaceutical Manufacturers and Associations (IFPMA) and President of the European Federation of Pharmaceutical Industries and Associations (EFPIA).

   LOGO  

NANCY J. HUTSON, Ph.D., 66, has been a member of the Board of Directors since the Company’s inception in February 2014 and Chairman of Endo’s Operations Committee, a member of Endo’s Nominating & Governance Committee and an alternate member of the Transactions Committee. Dr. Hutson retired from Pfizer, Inc. in 2006 after spending 25 years in various research and leadership positions, most recently serving as Senior Vice President, Pfizer Global Research and Development and Director of Pfizer’s pharmaceutical R&D site, known as Groton/New London Laboratories, the largest R&D site of any pharmaceutical company. At Pfizer, she led 4,500 colleagues (primarily scientists) and managed a budget in excess of $1 billion. She currently is a Director of BioCryst Pharmaceuticals, Inc. Dr. Huston previously served a Director of Cubist Pharmaceuticals until January 2015, and from March 2009 until February 2014, was a Director of Endo Health Solutions Inc. Dr. Hutson owns and operates Standing Stones Farm in Ledyard, CT, which is dedicated to supporting the equestrian sport of dressage.

   LOGO  

MICHAEL HYATT, 70, is a Director of Endo and is Chairman of Endo’s Transactions Committee, a member of Endo’s Compensation Committee and an alternate member of the Nominating & Governance Committee since the Company’s inception in February 2014. Mr. Hyatt is currently a Senior Advisor to Irving Place Capital, a leading institutional private equity firm focused on making equity investments in middle-market companies. Until 2008, Mr. Hyatt was a Senior Managing Director of Bear Stearns & Co., Inc. Mr. Hyatt previously served as a Director of Schiff Nutrition International until 2012. Until February 2014, Mr. Hyatt was a Director of Endo Health Solutions Inc.

   LOGO  

WILLIAM P. MONTAGUE, 69, has been a member of the Board of Directors since the Company’s inception in February 2014 and is Chairman of Endo’s Compensation Committee, a member of Endo’s Audit Committee and an alternate member of Endo’s Nominating & Governance Committee and Transactions Committee. Mr. Montague served as Chief Executive Officer of Mark IV Industries, Inc., a leading global diversified manufacturer of highly engineered systems and components for transportation infrastructure, vehicles and equipment, from November 2004 until his retirement on July 31, 2008 and as Director from March 1996. He joined Mark IV Industries in April 1972 as Treasurer/Controller, serving as Vice President of Finance from May 1974 to February 1986, then Executive Vice President and Chief Financial Officer from February 1986 to March 1996 and then as

   LOGO  

 

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President from March 1996 to November 2004. Mr. Montague is also a Director of Gibraltar Industries, Inc., a publicly traded manufacturer and distributor of products for the building and industrial markets since 1993, and has served as Chairman of Gibraltar’s Board if Directors since June 2015. From February 2013 until May 2014, Mr. Montague served as a Director of Allied Motion Technologies Inc., a publicly traded company focused exclusively on serving the motion control market. From February 2009 until February 2014, Mr. Montague was a Director of Endo Health Solutions Inc.

LOGO     

JILL D. SMITH, 58, has been a member of the Board of Directors since the Company’s inception in February 2014, a member of Endo’s Nominating & Governance Committee and Operations Committee and is an alternate member of the Audit Committee. Ms. Smith has been an international business leader for more than 25 years, including 16 years as a CEO of private and public companies in the technology and information services markets and was most recently Chairman, CEO and President of DigitalGlobe Inc., a leading provider of satellite imagery products and services to governments and companies worldwide. Ms. Smith is a Director and currently serves on the Board of Hexagon AB, a global provider of design, measurement and visualization technologies, J.M. Huber, a leader in engineered materials and Allied Minds, a United Kingdom listed technology development and commercialization company and has served on the corporate boards of SoundBite Communications, Inc., Germany-based Elster Group, Smith & Hawken and DigitalGlobe (prior to her appointment as Chairman and CEO). Ms. Smith was a Director of Endo Health Solutions Inc. from September 2012 until February 2014.

LOGO     

WILLIAM F. SPENGLER, 61, has been a member of the Board of Directors since the Company’s inception in February 2014, and is Chairman of Endo’s Audit Committee and an alternate member of the Compensation Committee and Operations Committee. From November 2010 until February 2012, Mr. Spengler was President of ChromaDex Corporation, a publicly traded company. From July 2008 until November 2010, Mr. Spengler served as Executive Vice President and Chief Financial Officer of Smith & Wesson Holding Corporation, a global leader in safety, security, protection and sport. Until March 2008, he was Executive Senior Vice President and Chief Financial Officer at MGI Pharmaceuticals Inc., an oncology- and acute care- focused biopharmaceutical company, where he had worked since 2005. Prior to joining MGI Pharma, Mr. Spengler was Executive Vice President and Chief Financial Officer at Guilford Pharmaceuticals Inc., a bioscience company, from July 2004 to October 2005. Mr. Spengler was previously Vice President of Finance at Black & Decker for 5 years, and prior to that spent 14 years in various finance, planning and business development positions at Bristol Myers Squibb. From 2008 until February 2014, Mr. Spengler was a Director of Endo Health Solutions Inc.

Vote Required

Provided that a quorum is present, each nominee for director receiving a majority of the votes cast at the Annual Meeting in person or by proxy will be elected.

The Board of Directors recommends a vote FOR the election of each of these nominees for election as director.

 

 

Shareholder Communications with Directors

The Board has established a process to receive communications from shareholders. Shareholders may contact any member or all members of the Board, any Board committee, or any chair of any such committee by mail. To communicate with the Board of Directors, any individual director or any group or committee of directors, correspondence should be addressed to the Board of Directors or any such individual director or group or committee of directors by either name or title. All such correspondence should be sent “c/o Company Secretary” to Endo International plc, First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

All communications received as set forth in the preceding paragraph will be opened by the office of our Company Secretary for the sole purpose of determining whether the contents represent a message to our directors. Any contents that are not in the nature of advertising, promotions of a product or service, or patently offensive material will be forwarded promptly to the addressee. In the case of communications to the Board or any group or committee of directors, the Company Secretary’s office will make sufficient copies of the contents to send to each director who is a member of the group or committee to which the envelope or e-mail is addressed.

The Company does not have a policy on director attendance at Annual Meetings. Messrs. Kimmel, Cooke, Higgins, De Silva and Dr. Hutson attended the 2015 Annual Meeting.

 

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Corporate Governance — Board Leadership Structure and Risk Oversight

Board Leadership Structure

We have a board leadership structure under which Mr. Kimmel serves as Chairman of the Board. Following the Annual Meeting, we will have nine directors, each of whom is independent with the exception of our President and Chief Executive Officer, Mr. De Silva. Our Board currently has five standing committees, each of which is comprised solely of independent directors with a committee chair. In addition, the Board appoints other committees as the Board considers necessary from time to time.

The Board believes that the Chairman and the role of the President and Chief Executive Officer should be separate and that the Chairman should not be an employee of the Company. Further, the Board believes this separation serves the Company’s shareholders best for setting our strategic priorities and executing our business strategy. We believe that our Board consists of directors with significant leadership, organizational and strategic skills, as discussed above. All of our independent directors have served as the Chairman, Vice Chairman, Chief Executive Officer, Chief Financial Officer, or Senior Executive of other companies. Accordingly, we believe that our independent directors have demonstrated leadership in large enterprises, many with relevant industry experience, and are well-versed in board processes and corporate governance. We believe that having directors with such significant leadership skills benefits our Company and our shareholders.

In accordance with the Company’s Memorandum and Articles of Association and our corporate governance guidelines, the Chairman is responsible for chairing Board meetings and setting the agenda for these meetings. Each director also may suggest items for inclusion on the agenda and may, at any Board meeting, raise subjects that are not on the agenda for that meeting. As required by our corporate governance guidelines, our independent directors meet separately, without management present, at each meeting of the Board. In addition, our Board committees regularly meet without members of management present.

As part of its annual self-evaluation process, the Board evaluates the Company’s governance structure. We believe that having a President and Chief Executive Officer for our Company with oversight of company operations, coupled with an experienced independent Board Chairman and experienced independent directors, with five separate independent committee chairs, is the appropriate leadership structure for Endo.

On a regular basis, the Company’s officers who are responsible for monitoring and managing the Company’s risks, including our President and Chief Executive Officer; our President, Par Pharmaceutical; our President, Branded Pharmaceuticals, our Executive Vice President & Chief Financial Officer; our Executive Vice President and Chief Legal Officer; our Executive Vice President, Chief Scientific Officer and Global Head of Research and Development and Quality; our Executive Vice President and Chief Compliance Officer; our Vice President, Controller and Principal Accounting Officer and our Director of Internal Audit, make reports to the Audit Committee. The Audit Committee, in turn, reports to the full Board. While the Audit Committee has primary responsibility for overseeing risk management, our entire Board is actively involved in overseeing risk management for the Company by engaging in periodic discussions with Company officers as the Board may deem appropriate. In addition, each of our Board committees considers the risks within its respective areas of responsibility.

Risk Oversight

The Board of Directors believes that one of its most important responsibilities is to oversee how management manages the various risks the Company faces and has delegated primary responsibility for overseeing the Company’s Enterprise Risk Management (or ERM) program to the Audit Committee. It is management’s responsibility to manage risk and bring to the Audit Committee’s and the Board of Directors’ attention the most material risks to the Company. The Company’s head of internal audit, who reports independently to the Audit Committee, facilitates the ERM program under the sponsorship of our Executive Leadership Team (or ELT), which includes our President and Chief Executive Officer; Executive Vice President & Chief Financial Officer; Executive Vice President, Chief Legal Officer; Chief Scientific Officer and Global Head of Research & Development and Quality; Executive Vice President, Human Resources; President, International Pharmaceuticals and Executive Vice President of Corporate Development; Executive Vice President and Chief Compliance Officer; President, Par Pharmaceuticals; President, Branded Pharmaceuticals; amongst others. Enterprise risks are identified and prioritized by management, and each risk is assigned by the Board to a Board committee or the full Board for oversight based on the nature of the risk area and the committee’s charter. The committee or full Board agendas include discussions of individual risk areas throughout the year. Additionally, the Audit Committee agendas include periodic updates on the ERM process throughout the year. The Board level risk discussions are led by an assigned executive sponsor, from the ELT, for each risk area.

The Audit Committee also regularly reviews treasury risks (insurance, credit and debt), financial and accounting, legal, tax and compliance risks, information technology security risks and other risk management functions. In addition, the Compensation Committee considers risks related to succession planning and the attraction and retention of talent as well as risks relating to the design of compensation programs and arrangements. The Compensation Committee also reviews compensation and benefit plans affecting Endo employees in addition to those applicable to our executive officers. The full Board considers strategic risks and opportunities and regularly receives detailed reports from the committees regarding risk oversight in their respective areas of responsibility.

Code of Conduct

The Board of Directors has adopted a Code of Conduct that applies to the Company’s directors, executives (including its President and Chief Executive Officer and Executive Vice President & Chief Financial Officer) and employees. The Board has also adopted a Director Code of Conduct. These Codes are posted on the Company’s website at www.endo.com, under “Investors—Corporate Governance—Code of Conduct.”

 

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Insider Trading Policy

The Board of Directors has adopted an Insider Trading Policy, which applies to all personnel, including non-employee Directors and officers, arising from our legal and ethical responsibilities as a public company. Among other restrictions, the Insider Trading Policy contains hedging restrictions prohibiting non-employee Directors, the Company’s executive officers and all other employees from purchasing any financial instrument that is designed to hedge or offset any decrease in the market value of the Company’s shares, including, but not limited to, covered calls, collars, or other derivative transactions. Non-employee Directors, the Company’s executive officers and all other employees are also restricted from engaging in short sales related to the Company’s ordinary shares, and pledging the Company’s shares as collateral for a loan, including holding shares in a margin account.

Ordinary Shares Ownership Guidelines

The Board of Directors has adopted share ownership guidelines (the Ownership Guidelines) both for non-employee Directors and for executive officers and senior management of the Company. The Board believes that non-employee directors and senior management should have a significant equity position in the Company and that the Ownership Guidelines serve to further the Board’s interest in encouraging a longer-term focus in managing the Company. The Board also believes that the Ownership Guidelines align the interests of its directors and senior management with the interests of shareholders and further promote Endo’s commitment to sound corporate governance. The Ownership Guidelines are posted on the Company’s website at www.endo.com, under “Investors—Corporate Governance—Compensation Committee.” The current Ownership Guidelines provide that non-employee directors should attain

Endo share ownership equal in value to at least five times his or her current annual cash retainer within the later of five years of joining the Board and December 10, 2015.

Review and Approval of Transactions with Related Persons

The Board of Directors has adopted written policies and procedures for review, approval and monitoring of transactions involving the Company and “related persons” (directors and executive officers or their immediate family members, or shareholders owning five percent or greater of the Company’s issued ordinary shares). The policy covers any related person transaction that meets the minimum threshold for disclosure in the Proxy Statement under the relevant rules of the U.S. Securities and Exchange Commission (the SEC) (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest).

Committees of the Board of Directors

The Board of Directors has a standing Audit Committee, Compensation Committee, Nominating & Governance Committee, Operations Committee and Transactions Committee. The following table shows the directors who are currently members or Chairman of each of these committees. In addition to the committee members listed below, the Board has designated other Board members as alternate members of the committees who can attend meetings in the stead of appointed members.

 

Name   Audit Committee  

Compensation

Committee

  Nominating &
Governance
Committee
  Operations
Committee
(formerly known
as the Research
& Development
Committee)
 

Transactions

Committee

Roger H. Kimmel

  Alternate   -   Chairman   Alternate   Member

Rajiv De Silva

  -   -   -   -   -

Shane M. Cooke

  Member   -   -   -   Member

Arthur J. Higgins

  -   Member   -   Member   Member

Nancy J. Hutson, Ph.D.

  -   -   Member   Chairman   Alternate

Michael Hyatt

  -   Member   Alternate   -   Chairman

William P. Montague

  Member   Chairman   Alternate   -   Alternate

Jill D. Smith

  Alternate   -   Member   Member   -

William F. Spengler

  Chairman   Alternate   -   Alternate   -

Audit Committee

The Audit Committee is responsible for overseeing the Company’s financial reporting process on behalf of the Board of Directors. In addition, the Audit Committee reviews, acts on and reports to the Board of Directors with respect to various auditing and accounting matters, including the selection of the Company’s independent auditors, the scope of the annual audits, fees to be paid to the auditors, the performance of the Company’s independent registered public accounting firm and the accounting practices of the Company and the Company’s internal controls and legal compliance functions. The Audit Committee operates pursuant to a written charter adopted by the Board of Directors, which is available on the Company’s website at www.endo.com, under “Investors—Corporate Governance—Audit Committee.” The charter describes the nature and scope of responsibilities of the Audit Committee.

 

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Management of the Company has the primary responsibility for the Company’s financial reporting process, principles and internal controls as well as preparation of its financial statements. The Company’s independent registered public accounting firm is responsible for performing an independent audit of the Company’s financial statements and expressing an opinion as to the conformity of such financial statements with accounting principles generally accepted in the United States.

Messrs. Cooke, Montague and Spengler serve as members of the Audit Committee, while Mr. Kimmel and Ms. Smith serve as alternates. Subject to their election at the 2016 Annual Meeting, the Board of Directors expects to reappoint Messrs. Cooke, Montague and Spengler as members of the Audit Committee and Mr. Kimmel and Ms. Smith as alternates, and to reappoint Mr. Spengler as the Chair of the Audit Committee effective June 7, 2016. Between January 1, 2015 and December 31, 2015, the Audit Committee met six times, in each case including periodic meetings held separately with management, the Company’s internal auditors and the independent registered public accounting firm. The Board has determined that Messrs. Spengler and Montague are “financial experts”, as defined by the SEC regulations, and he has the related financial management expertise within the meaning of the NASDAQ rules. The Board of Directors has determined that Messrs. Kimmel, Cooke, Montague and Spengler and Ms. Smith are “independent” and financially literate in accordance with the criteria established by the SEC and the NASDAQ.

Compensation Committee

The Compensation Committee of the Board of Directors determines the salaries and incentive compensation of the executive officers of the Company and provides broad guidance regarding the remuneration and incentive compensation of the other employees of the Company. The Compensation Committee also reviews and acts on any recommendations of the Company’s management for awards granted under the Endo International plc 2015 Stock Incentive Plan. The current members of the Compensation Committee are Messrs. Montague, Higgins and Hyatt, while Mr. Spengler serves as an alternate. Subject to their election at the 2016 Annual Meeting, the Board of Directors expects to reappoint Messrs. Montague, Higgins and Hyatt as members of the Compensation Committee, Mr. Spengler as an alternate, and to reappoint Mr. Montague as Chair of the Compensation Committee, effective June 7, 2016. Each of Messrs. Montague, Higgins, Hyatt, and Spengler is “independent” in accordance with the criteria established by the SEC and the NASDAQ. Between January 1, 2015 and December 31, 2015, the Compensation Committee of the Company met seven times. The Compensation Committee operates pursuant to a written charter adopted by the Board of Directors, which is available on the Company’s website at www.endo.com, under “Investors-Corporate Governance-Compensation Committee.” The charter describes the nature and scope of responsibilities of the Compensation Committee.

The primary function of the Compensation Committee is to conduct reviews of the Company’s general executive compensation policies and strategies and oversee and evaluate the Company’s overall compensation structure and programs. The Compensation Committee confirms that total compensation paid to the President and Chief Executive Officer, Executive Vice President & Chief Financial Officer and those other individuals included in the Summary Compensation Table is competitive and performance-based. All of these individuals are referred to as the named executive officers, or NEOs. Responsibilities of the Compensation Committee include, but are not limited to:

  ¡  

evaluating and approving goals and objectives relevant to compensation of the President and Chief Executive Officer and other NEOs, and evaluating the performance of the executives in light of those goals and objectives;

  ¡  

determining and recommending for approval by the Board of Directors the compensation level of the President and Chief Executive Officer;

  ¡  

evaluating and approving compensation levels and all grants of equity-based compensation to the NEOs (and certain other employees), as recommended by the Company’s President and CEO;

  ¡  

recommending to the Board compensation policies for outside directors;

  ¡  

providing general compensation oversight on significant issues affecting the Company’s compensation philosophy and/or policies;

  ¡  

providing input to management on whether compensation arrangements for the NEOs (and certain other employees) incentivize excessive risk taking;

  ¡  

establishing or reviewing performance-based and equity-based incentive plans for the President and Chief Executive Officer, other NEOs, and reviewing other benefit programs and perquisites for the Company’s executive officers;

  ¡  

reviewing and approving the aggregate amount of dollars, in the case of the annual cash incentive compensation, and performance share units (PSU), restricted stock units (RSU), and stock options, in the case of the annual long-term incentive (LTI) compensation, that is available to the Company each year;

  ¡  

reviewing at least annually the Company’s succession plan relating to Named Executive Officer (NEO) positions with a focus on the ongoing evaluation and planning related to succession for the position of President and Chief Executive Officer; and

  ¡  

reviewing and recommending to the Board for approval the annual goals and objectives of the Company as a whole, which in turn serve as the foundation for incentive compensation.

 

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Endo management is required to provide reviews and recommendations for the Compensation Committee’s consideration, and to manage the Company’s executive compensation programs, policies and governance. Direct responsibilities in this regard include, but are not limited to:

  ¡  

providing an ongoing review of the effectiveness of the compensation programs for all employees, including competitiveness, and alignment with the Company’s objectives;

  ¡  

recommending changes, if necessary, to achieve all program objectives; and

  ¡  

recommending pay levels, payout and/or awards for NEOs and certain other employees other than the President and Chief Executive Officer.

The Compensation Committee can exercise its discretion in modifying any recommended adjustments or awards to the NEOs, in accordance with Internal Revenue Code (IRC) 162(m) requirements related to performance-based compensation.

Use of Compensation Consultants

The Compensation Committee retains Hay Group as its consultant to provide objective, independent analysis, advice and recommendations with regard to executive compensation including, but not limited to, competitive market data and compensation analysis and recommendations related to our CEO, Board and our other senior executives. Hay Group served as the independent executive compensation consultant to the Compensation Committee for the Company’s entire 2015 fiscal year. The consultant reports to the Chairman of the Compensation Committee and has direct access to the other members of the Compensation Committee. The Compensation Committee also authorizes the consultant to share with, request and receive from management certain specified information in order to prepare for meetings with, and respond to requests from, the Compensation Committee. The Compensation Committee may retain other consultants and advisors from time to time.

A representative of Hay Group attends meetings of the Compensation Committee, is available to participate in executive sessions and communicates directly with the Compensation Committee.

In making an overall determination of the independence and lack of any conflict of interest regarding Hay Group and Hay Group’s lead advisor to the Compensation Committee, the Compensation Committee considered, among other things, the following factors:

  ¡  

the amount of Hay Group’s fees for executive compensation consulting services, noting in particular that such fees are nominal when considered in the context of Hay Group’s total revenues for the period,

  ¡  

Hay Group’s policies and procedures concerning conflicts of interest (copies of which were made available to the Compensation Committee),

  ¡  

there are no other business or personal relationships between any members of the Compensation Committee and Hay Group’s lead advisor to the Compensation Committee,

  ¡  

the lead Hay Group advisor who provides executive compensation consulting services to the Company does not directly own any shares of the Company, and has agreed not purchase any such shares so long as Hay Group and the lead advisor is engaged to provide executive compensation advisory services to the Compensation Committee,

  ¡  

there are no other business or personal relationships between the Company’s executives and the lead Hay Group advisor, and

  ¡  

any other factors relevant to the independence of Hay Group.

In 2015, Hay Group assisted the Compensation Committee with, among other things, (i) performing a review of the Company’s executive compensation program, including competitive market analyses, assessment of potential risks associated with compensation arrangements, policies and plans and considerations related to Endo’s CEO and our other senior executives, (ii) determining the appropriate allocation among short-term and long-term compensation, cash and non-cash compensation, and the different forms of non-cash compensation, (iii) identifying appropriate Pay Comparator Companies (as defined below in the Compensation Discussion and Analysis (CD&A) section) for purposes of benchmarking the Company’s executive compensation in the industry sectors in which Endo competes for talent, and (iv) providing competitive market information and an overview of critical issues and trends affecting the executive compensation landscape. The aggregate amount of fees for Hay Group’s services was $269,634.

On December 1, 2015, Korn/Ferry International (Korn Ferry) announced the completion of its acquisition of Hay Group. Korn Ferry, a nationally recognized global people and organizational advisory firm, has provided services to Endo in the areas of executive recruiting and leadership development over the past several years. Prior to the announcement of Korn Ferry’s acquisition of Hay Group in September of 2015, Endo engaged Korn Ferry in the first half of 2015 to provide executive recruiting services. Following the announced acquisition, Endo’s Board considered Korn Ferry-Hay Group’s Policy on Avoiding Conflicts of Interest, which confirms that Hay Group’s compensation consultants will continue to provide clients with independent, unbiased advice. Following this review, Endo’s Board determined that the policy sufficiently allows Hay Group Compensation Committee consultants to maintain independence. Endo has not incurred any fees related to services provided by Korn Ferry since the completion of its acquisition of Hay Group.

Compensation Committee Interlocks and Insider Participation

None of the members of the Compensation Committee during 2015 or as of the date of this Proxy Statement is or has been an officer or employee of the Company and no executive officer of the Company served on the compensation committee or board of any company that employed any member of the Company’s Compensation Committee or Board of Directors.

 

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Nominating & Governance Committee

The Nominating & Governance Committee of the Board of Directors, which is comprised of independent directors, identifies and recommends to the Board individuals qualified to serve as directors of the Company, recommends to the Board directors to serve on committees of the Board and advises the Board with respect to matters of Board composition and procedures. The Nominating & Governance Committee also oversees the Company’s corporate governance.

The Nominating & Governance Committee will consider director candidates recommended by shareholders. In considering candidates submitted by shareholders, the Nominating & Governance Committee will take into consideration the needs of the Board and the qualifications of the candidate. The Nominating & Governance Committee may also take into consideration the number of shares held by the recommending shareholder and the length of time that such shares have been held. To have a candidate considered by the Nominating & Governance Committee, a shareholder must submit the recommendation in writing and must include the following information:

  ¡  

The name of the shareholder and evidence of the person’s ownership of shares in the Company, including the number of shares owned and the length of time of ownership; and

  ¡  

The name of the candidate, the candidate’s resume or a listing of his or her qualifications to be a director of the Company and the person’s consent to be named as a director if selected by the Nominating & Governance Committee and nominated by the Board.

The shareholder recommendation and information described above must be sent to the Company Secretary at Endo International plc, First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland, and must be received by the Company Secretary not less than 120 days prior to the anniversary date of the Company’s most recent Annual General Meeting.

While the Board does not have a formal policy with respect to diversity, the Board of Directors and the Nominating & Governance Committee advocate diversity in the broadest sense. We believe that it is important that nominees for the Board represent diverse viewpoints and have diverse backgrounds. The Nominating & Governance Committee looks at a broad array of qualifications and attributes including: experience, skills, expertise, and personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, conflicts of interest and such other relevant factors that the Nominating & Governance Committee considers appropriate in the context of the needs of the Board of Directors. Although not specified in the charter, the Committee actively considers ethnicity and gender when selecting candidates so that additional diversity may be represented on the Board.

The Nominating & Governance Committee engages national search firms that specialize in identifying and evaluating director candidates. As described above, the Nominating & Governance Committee will also consider candidates recommended by shareholders for inclusion in the search process.

Once a person has been identified by the Nominating & Governance Committee as a potential candidate, the Nominating & Governance Committee may collect and review publicly available information regarding the person to assess whether the person should be considered further. If the Nominating & Governance Committee determines that the candidate warrants further consideration, the Chairman or a member of the Nominating & Governance Committee utilizes a recognized search firm to review the candidate’s qualifications and background. Generally, if the person expresses a willingness to be considered and to serve on the Board, the Nominating & Governance Committee requests information from the candidate, reviews the person’s accomplishments and qualifications, including in light of any other candidates that the Nominating & Governance Committee might be considering, and conducts one or more interviews with the candidate. Generally, Nominating & Governance Committee members may conduct additional due diligence of the candidate. The Nominating & Governance Committee’s evaluation process does not vary based on whether or not a candidate is recommended by a shareholder, although, as stated above, the Board may take into consideration the number of shares held by the recommending shareholder and the length of time that such shares have been held.

The Nominating & Governance Committee has established procedures under which any director who is not elected shall, if requested by the Board upon the Nominating & Governance Committee’s recommendation, tender his or her resignation to the Board of Directors. The Board of Directors will publicly disclose its decisions of whether or not to request any director to tender his or her resignation and whether or not to accept any such tendered resignation and the rationale behind such decisions within 90 days from the date of the certification of the election results.

The current members of the Nominating & Governance Committee are Mr. Kimmel, Dr. Hutson and Ms. Smith, while Messrs. Hyatt and Montague serve as alternates. The Board has elected Mr. Kimmel as Chairman of the Nominating & Governance Committee. Between January 1, 2015 and December 31, 2015, the Nominating & Governance Committee of the Company met four times. Subject to their election at the 2016 Annual Meeting, the Board of Directors expects to reappoint Mr. Kimmel, Dr. Hutson and Ms. Smith as members of the Nominating & Governance Committee, Messrs. Hyatt and Montague as alternates, and to re-appoint Mr. Kimmel as Chair of the Nominating & Governance Committee, effective June 7, 2016. The Board of Directors has determined that all of the members of the Nominating & Governance Committee are “independent” in accordance with the criteria established by the SEC and the NASDAQ. The Nominating & Governance Committee operates pursuant to a written charter adopted by the Board of Directors, which is available on the Company’s website at www.endo.com, under “Investors-Corporate Governance-Nominating & Governance Committee.”

 

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Operations Committee

The purpose of the Operations Committee is to review matters relating to scientific technology, research and development activities and pipeline investments; to provide advice and counsel to the Company’s management and Transactions Committee in connection with management’s decisions regarding the allocation, deployment, utilization of, and investment in the Company’s scientific assets; to provide advice and counsel to the Company’s management in connection with decisions regarding acquiring or divesting scientific technology or otherwise investing in research or development programs; to assist the Board by providing oversight of regulatory, compliance, quality and legal matters; and to designate a subcommittee to assess and review the Company’s Compliance Program, if necessary. Between January 1, 2015 and December 31, 2015, the Operations Committee of the Company met five times. The current members of the Operations Committee are Dr. Hutson, Mr. Higgins and Ms. Smith, while Messrs. Kimmel and Spengler serve as alternates. Subject to their election at the 2016 Annual Meeting, the Board of Directors expects to reappoint Dr. Hutson, Mr. Higgins and Ms. Smith as members of the Operations Committee, Messrs. Kimmel and Spengler as alternates, and to reappoint Dr. Hutson as the Chair of the Operations Committee, effective June 7, 2016.

Transactions Committee

On July 31, 2007, the Board of Directors formed a Transactions Committee to provide advice and guidance to the Company’s management in connection with the exploration of strategic acquisition and licensing opportunities as well as any overture for merger with the Company, or sale of the Company or other like event. The current members of the Transactions Committee are Messrs. Hyatt, Cooke, Higgins and Kimmel, while Dr. Hutson and Mr. Montague serve as alternates. Subject to their election at the 2016 Annual Meeting, the Board of Directors expects to reappoint Messrs. Hyatt, Cooke, Higgins and Kimmel as members of the Transactions Committee, Dr. Hutson and Mr. Montague as alternates, and to reappoint Mr. Hyatt as the Chair of the Transactions Committee, effective June 7, 2016. Between January 1, 2015 and December 31, 2015, the Transaction Committee of the Company met three times.

Audit Committee Report

The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements as of and for the year ended December 31, 2015 with the management of the Company and PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm. Further, the Audit Committee has discussed with PricewaterhouseCoopers LLP the matters required to be discussed by the Public Company Accounting and Oversight Board’s (PCAOB) Auditing Standard No. 16, Communications with Audit Committees, other standards of the PCAOB (United States), rules of the SEC, and other applicable regulations, relating to the firm’s judgment about the quality, not just the acceptability, of the Company’s accounting principles, the reasonableness of significant judgments and estimates, and the clarity of disclosures in the audited consolidated financial statements as of and for the year ended December 31, 2015.

The Audit Committee also has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, which relate to PricewaterhouseCoopers LLP’s independence from the Company, and has discussed with PricewaterhouseCoopers LLP their independence from the Company. The Audit Committee has also considered whether the independent registered public accounting firm’s provision of non-audit services to the Company is compatible with maintaining the firm’s independence. The Audit Committee has concluded that the independent registered public accounting firm is independent from the Company and its management. The Audit Committee has also discussed with management of the Company and PricewaterhouseCoopers LLP such other matters and received such assurances from them as it has deemed appropriate.

The Committee also reviewed management’s report on its assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered public accounting firm’s report on the effectiveness of the Company’s internal control over financial reporting. In addition, the Audit Committee reviewed key initiatives and programs aimed at strengthening the effectiveness of the Company’s internal and disclosure control structure. As part of this process, the Audit Committee continued to monitor the scope and adequacy of the Company’s internal auditing program.

Based on the reviews, reports and discussions referred to above, the Audit Committee recommended to the Board of Directors, and the Board approved, that the Company’s audited consolidated financial statements for the year ended December 31, 2015 and management’s assessment of the effectiveness of the Endo International plc’s internal control over financial reporting be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, for filing with the SEC. The Audit Committee has selected, and the Board of Directors has approved, subject to shareholder approval, the selection of PricewaterhouseCoopers LLP as the Company’s independent auditors for the year ending December 31, 2016.

Submitted by the Audit Committee of the Company’s Board of Directors.

Members of the Audit Committee:

William F. Spengler (Chairman)

Shane M. Cooke (Member)

William P. Montague (Member)

Roger H. Kimmel (Alternate)

Jill D. Smith (Alternate)

 

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The above Audit Committee Report does not constitute soliciting material, and shall not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, except to the extent that the Company specifically incorporates the Audit Committee Report by reference therein.

 

 

Proposal 2: Approval of Appointment of Independent

Registered Public Accounting Firm

The Audit Committee of the Board of Directors has selected PricewaterhouseCoopers LLP, an independent registered accounting firm, to audit the books and financial records of the Company for the year ending December 31, 2016. The Company is asking its shareholders to approve the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors for 2016 and to authorize the Audit Committee of the Board of Directors to determine the auditor’s remuneration.

A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting and available to respond to appropriate questions, and will have the opportunity to make a statement if he or she desires to do so.

As previously disclosed in the Company’s Current Report on Form 8-K filed on June 13, 2014, on June 11, 2014 the Audit Committee of Endo’s Board of Directors requested Deloitte & Touche LLP to resign as the independent registered public accounting firm previously engaged as the principal accountant to audit the Company’s financial statements. This became effective on June 12, 2014, upon the engagement of PricewaterhouseCoopers. There were no disagreements or reportable events in connection with the change in accountants requiring disclosure under Item 304(b) of Regulation S-K. There were no additional changes made during fiscal year 2015.

Fees Paid to the Independent Registered Public Accounting Firm

PricewaterhouseCoopers LLP served as the Company’s independent registered public accounting firm for the years ended December 31, 2015 and 2014. The table below summarizes the aggregate fees for services PricewaterhouseCoopers LLP provided during years 2015 and 2014, respectively.

 

a

Fees for audit services in 2015 and 2014 consisted of:

  ¡   Audit of the Company’s annual financial statements;
  ¡   Evaluation and reporting on the effectiveness of the Company’s internal controls over financial reporting;
  ¡   Reviews of the Company’s quarterly financial statements;
     2015     2014  

Audit Feesa

  $             10,040,000      $           5,774,500   

Audit-Related Feesb

  $ 639,500      $ 3,025,000   

Tax-Feesc

  $ 1,373,685      $ 608,600   

All Other Feesd

  $ 8,910      $ 423,100   
   

 

 

   

 

 

 

Total

  $ 12,062,095      $ 9,831,200   
   

 

 

   

 

 

 
   

 

 

   

 

 

 
 
  ¡   Statutory audits for certain of the Company’s subsidiaries; and
  ¡   Comfort letters, consents and other services related to debt issuances, an exchange offer and other SEC matters.
b

Fees for audit-related services in 2015 and 2014 consisted of:

  ¡  

Attestation services requested by management and fees associated with carve-out audits;

  ¡  

Due diligence services; and

  ¡  

Pre- or post- implementation reviews of processes or systems.

c

Fees for tax services in 2015 and 2014 consisted of tax compliance and tax planning and advice.

  ¡  

Tax fees include statutory tax return preparation and review and advice on the impact of changes in local tax laws.

d

All other fees principally includes subscriptions to knowledge tools and other advisory services.

In considering the nature of the services provided by PricewaterhouseCoopers LLP, the Audit Committee determined that such services are compatible with the provision of independent audit services. The Audit Committee discussed these services with PricewaterhouseCoopers LLP and Company management to determine that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

 

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Pre-Approval Policy

Consistent with SEC policies regarding auditor independence, the Audit Committee has responsibility for appointing, setting compensation and overseeing the work of the independent registered public accounting firm. In recognition of this responsibility, the Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent registered public accounting firm.

Prior to the engagement of the independent registered public accounting firm for the next year’s audit, management will submit a list of services and related fees expected to be rendered during that year within each of the four categories of services to the Audit Committee for approval.

 

  1

Audit services include audit work performed on the financial statements and related to the evaluation and reporting on the effectiveness of the Company’s internal control over financial reporting, as well as work that generally only the independent registered public accounting firm can reasonably be expected to provide, including comfort letters, consents and other services related to SEC matters, and discussion surrounding the proper application of financial accounting and/or reporting standards.

  2

Audit-related services are for assurance and related services that are traditionally performed by the independent registered public accounting firm, including due diligence related to mergers and acquisitions, carve-out audits and employee benefit plan audits.

  3

Tax services include all services, except those services specifically related to the audit of the financial statements, performed by the independent registered public accounting firm’s tax personnel, including tax analysis; assisting with the coordination of execution of tax related activities, primarily in the area of mergers and acquisitions; supporting other tax related regulatory requirements; and tax compliance and reporting.

  4 Other Fees are those associated with services not captured in the other categories.

Prior to engagement, the Audit Committee pre-approves the independent registered public accounting firm’s services within each category. The fees are budgeted and the Audit Committee requires the independent registered public accounting firm and management to report actual fees versus budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent registered public accounting firm for additional services not contemplated in the original pre-approval categories. In those instances, the Audit Committee requires specific pre-approval before engaging the independent registered public accounting firm.

The Audit Committee may delegate pre-approval authority to one or more of its members. The member to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Vote Required

The affirmative vote of a majority of the issued ordinary shares entitled to vote and represented at the Annual Meeting in person or by proxy will be required to approve the appointment of the Company’s independent auditors and the authorization to the Audit Committee of the Board of Directors to determine the auditor’s remuneration.

 

The Audit Committee and the Board of Directors recommend a vote FOR the approval of the Board’s appointment of PricewaterhouseCoopers LLP as the independent auditors for the year ending December 31, 2016 and to authorize the Audit Committee of the Board of Directors to determine the auditors’ remuneration.

 

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Proposal 3: Advisory Vote on the Compensation of Our

Named Executive Officers (“Say-on-Pay Vote”)

Compensation Philosophy

Pay-for-performance, alignment with shareholder interests and offering competitive pay are fundamental to Endo’s compensation philosophy.

 

 

A significant portion of executive compensation is linked directly with Endo’s short and long-term strategic and operating performance, without encouraging excessive risk;

 
 

Endo’s executive pay programs incorporate significant amounts of performance-based equity that directly reflects Endo’s share price performance; and

 
 

Total Direct Compensation is competitive within the Endo Pay Comparator Companies, enabling the Company to attract and retain highly-talented individuals and motivate them to achieve high level performance, while embracing the Company’s Key Values and behaviors.

 

Endo’s CEO compensation package supports this philosophy by offering annual and long-term incentive compensation opportunities that are entirely performance based. Cash compensation received is subject to the Company achieving its annual performance objectives, and any realized value in long-term equity value is dependent upon the delivery of shareholder value.

Pay-for-performance Incentive Plan Design

The Company’s compensation programs consist of elements designed to complement each other and reward achievement of short-term and long-term objectives tied to the Company’s performance through the establishment and achievement of strategic operating metrics or as a function of the Company’s share price Total Shareholder Return (TSR). We have chosen the selected metrics to align employee compensation, including compensation for the NEOs as disclosed in the Summary Compensation Table located under the section entitled “COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS”, to the Company’s strategic operating results and business strategy in an effort to enhance shareholder value. The summary below reflects the incentive program enhancements implemented and maintained by Endo in an effort to optimize pay-for-performance:

 

Pay-for-performance Incentive Plan Design

¡   Emphasis on performance-based short- and long-term incentive programs

¡   PSUs comprise a significant portion of senior management compensation

¡   PSUs for Mr. De Silva account for 75% of LTI value with remaining LTI in the form of stock options; 100% tied to value creation

¡   PSUs for senior management account for 50% of LTI value; 75% tied to value creation

¡   PSUs for Vice President-level positions account for 33.3% of LTI Value; 66.6% tied to value creation

¡   PSU measurement based on 3-year share price appreciation performance

¡   LTI awards granted to employees are generally required to vest over a 3-year period (subject to earlier vesting on certain events)

¡   Equity plans prohibit the re-pricing of equity awards without shareholder approval

¡   “Double trigger” change in control provision

¡   Equity plans do not allow for cash buyouts of underwater options

Compensation Committee Governance

The Compensation Committee regularly reviews industry compensation practices to align the Company’s compensation philosophy with the Company’s business strategy, while focusing on the enhancement of long-term shareholder value and management of risk. The summary below reflects the leading governance practices implemented and maintained by Endo’s Compensation Committee:

 

Governance

¡   “Pay Comparator Companies” utilized for NEO total compensation comparison purposes

¡   Annual assessments of NEO pay positioning against Pay Comparator Companies

¡   Annual reviews of risks associated with compensation arrangements, policies and practices

¡   Compensation recovery policy (clawback) in the event of a restatement of Company financial results

¡   Hedging and pledging of Company shares is prohibited

¡   Change in Control gross-up payments prohibited

¡   Employment agreements with automatic renewal provisions prohibited

¡   Non-employee Directors and executive management ownership guidelines

¡   Ownership guidelines requiring non-employee Directors not to sell shares until guidelines are attained

¡   Shareholder approval sought for non-employee Director share limitations (described in additional detail in Proposal 6)

¡   The Compensation Committee retains an independent compensation consultant

 

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As the Company’s shareholders consider the evolution of Endo’s pay-for-performance practices over the past several years, consideration should be given to the significant progress made since the company’s transformational strategic realignment initiated in 2013 (see “COMPENSATION DISCUSSION AND ANALYSIS”). Based on the Company’s performance and competitive positioning of pay over the past three years, CEO pay-for-performance has demonstrated a high degree of alignment in 2013, 2014 and 2015 with Endo’s Pay Comparator Companies across multiple quantitative screens. Since 2013, the Company has also been successful in managing share utilization levels while enhancing pay-for-performance effectiveness as noted below:

 

Pay-For-Performance Enhancements

2013:

¡   Enhanced the Endo performance scorecard process by adding growth drivers to the Company’s strategic priorities, including the achievement of operating efficiency goals and the execution of value-creating accretive deals

¡   Increased the weighting and impact of financial performance on the Company’s annual incentive program

¡   Increased NEO allocation of PSUs to 50% of LTI mix; providing for 75% of total LTI value based upon 3-year share price growth

¡   Enhanced opportunity for all PSU recipients if significant 3-year growth stock appreciation price targets are achieved

2014:

¡   Increased CEO allocation of PSUs to 75% of LTI mix; allowing for 100% of total LTI value based upon share price growth

¡   Expanded PSU eligibility while adjusting the equity mix for all Vice President-level positions; allowing for approximately 67% of total LTI value based upon share price growth

2015:

¡   Expanded stock option eligibility to middle-management positions

¡   Implemented minimum vesting requirements

¡   Implemented double-trigger PSU vesting upon a Change In Control

2016:

¡   Enhanced PSU program to measure 3-year performance against relative TSR with maximum award levels also dependent upon Endo achieving absolute stock price performance goals

¡   Approved a custom index of pharmaceutical companies, including companies in the New York Stock Exchange ARCA Pharmaceutical Index, Endo’s Pay Comparator Companies, and other specialty pharmaceutical companies to determine Endo’s relative TSR performance

The Compensation Committee has and will continue to take action to structure our executive compensation practices in a manner that is performance-based with a view towards maximizing shareholder value creation and preservation. The Board believes that the executive compensation as disclosed in the CD&A, tabular disclosures, and other narrative executive compensation disclosures in this Proxy Statement corresponds directly with the Company’s compensation philosophy and aligns, where appropriate, with our Pay Comparator Companies’ pay practices.

Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act requires that we seek a non-binding advisory vote from our shareholders to approve the compensation of our named executive officers, or NEOs, as disclosed in the CD&A and tabular disclosures of this Proxy Statement. Since the annual required vote is advisory, the result of the vote is not binding upon the Board.

 

The Board of Directors recommends that you vote FOR the approval, on an advisory basis, of the compensation to be paid to Endo’s named executive officers as described in the CD&A, tabular disclosures, and other narrative executive compensation disclosures in this Proxy Statement as required by the Securities and Exchange Commission.

Effect of Proposal

The above say-on-pay resolution is non-binding. The approval or disapproval of this proposal by shareholders will not require the Board or the Compensation Committee to take any action regarding the Company’s executive compensation practices.

The Board values the opinions of the Company’s shareholders as expressed through their votes and other communications. Although the resolution is non-binding, the Board will consider the outcome of the advisory vote on executive compensation when making future compensation decisions.

 

 

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Proposals 4 and 5

Proposal 4 sets out certain proposed amendments to the Company’s Memorandum of Association and Proposal 5 sets out certain proposed amendments to the Company’s Articles of Association. Under Irish law, any amendment to a company’s Articles of Association must be voted on separately from any amendment to a company’s Memorandum of Association. For these reasons, we are asking shareholders to separately vote on Proposals 4 and 5, however, given the inextricable link between Proposals 4 and 5, each proposal is subject to and conditioned upon the other proposal being approved by shareholders. If one of these proposals is not adopted, the other proposal will also not be adopted.

 

 

Proposal 4: Amend the Company’s Memorandum of Association

Background

The Companies Act 2014, which consolidates Irish company law, took effect on June 1, 2015. In addition to consolidating pre-existing Irish company law, the Companies Act 2014 amended certain provisions of the pre-existing Irish company law as well as introduced new provisions.

Proposal 4 is being proposed so that certain administrative amendments can be made to the Company’s Memorandum of Association to account for the adoption of the Companies Act 2014. These proposed updates to the Memorandum of Association in response to the enactment of the Companies Act 2014 will not materially change the rights of the Company’s shareholders.

A copy of the Memorandum of Association in the form proposed to be amended by the following special resolution is attached to this proxy statement, as Annex 1. We urge you to read Annex 1 in its entirety before you cast your vote.

Vote Required

The affirmative vote of at least 75% of the issued ordinary shares entitled to vote and be represented at the Annual Meeting in person or by proxy will be required to approve the amendment of the Company’s Memorandum of Association. In addition, adoption of Proposal 4 is subject to and conditioned upon shareholder approval of Proposal 5.

Accordingly, the Board of Directors is requesting that the shareholders approve the following resolution as a special resolution of the Company:

“RESOLVED as a special resolution that, subject to and conditional upon Proposal 5 being passed, Clauses 2 and 3.16 of the Memorandum of Association, in the form produced to the meeting (a copy of which are marked ‘X’ for identification and as shown in Annex 1 of the proxy statement), be adopted in substitution for, and the exclusion of, the existing Clauses 2, and 3.16.”

 

The Board of Directors recommends a vote FOR the amendment of the Company’s Memorandum of Association in the manner described above.

 

 

Proposal 5: Amend the Company’s Articles of Association

Background

There are two categories of amendments proposed to be made to the Company’s Articles of Association: (i) amendment to the advance notice provisions; and (ii) amendments in connection with the enactment of the Companies Act 2014.

The description set forth below is only intended to be a summary of the amendments proposed to be made to the Company’s Articles of Association pursuant to this proposal. A copy of the Articles of Association in the form proposed to be amended by the following special resolution is attached to this proxy statement, as Annex 1. We urge you to read Annex 1 in its entirety before you cast your vote.

(i) Amendment to the Advance Notice Provisions

The Company’s Articles of Association provide shareholders with the right to propose business at a general meeting and nominees for election to the Board. In order to avail of such right, a shareholder’s notice of the proposed business or nominees must be delivered to the Company’s registered office not less than sixty (60) days nor more than ninety (90) days prior to the anniversary date of the immediately preceding annual meeting of the Company. The Board of Directors has determined, based on, among other things, its review of current corporate governance norms and practices, (i) any shareholder who desires to propose a nominee for election to the Board of Directors should provide meaningful disclosure so that the Board of Directors and shareholders can adequately assess the nominee and (ii) the time frame during which any such notice should be delivered to the Company should be adjusted so that such notices must be delivered not less than ninety (90) days nor more than one-hundred and twenty (120) days prior to the anniversary date of the immediately preceding annual meeting of the Company. In light of these principles, the Board of Directors recommends amending our Articles of Association to enhance the current dis-

 

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closure obligations applicable to shareholder nominations and to adjust the time frame for delivering notice provided in the Company’s advance notice provision. Specifically, our Board of Directors believes that making the following enhancements to the advance notice provision in our Articles of Association is in the best interests of the Company and its shareholders:

 

Item   Current Provision   Proposed Amendment
Timely notice   60-90 days prior to the anniversary date of the immediately preceding annual meeting   90-120 days prior to the anniversary date of the immediately preceding annual meeting
Disclosure and details of any fee arrangement the shareholder nominee has entered into or compensation received by the shareholder nominee from any person or entity other than the Company, in each case in connection with their candidacy or service as a Director of the Company   No requirement for shareholder nominee to provide   Must be provided by shareholder nominee
Either (i) a representation that the shareholder nominee is not and will not become a party to any voting commitment with respect to any matter to be voted upon by the Board of Directors or (ii) if the shareholder nominee is a party to a voting commitment, a detailed disclosure from the shareholder nominee regarding the voting commitment, its terms and any such compensation received   No requirement for shareholder nominee to provide   Must be provided by shareholder nominee
Representation that the shareholder nominee will agree to and abide by all policies of the Board if elected (e.g., Code of Conduct for the Board of Directors for Endo International plc, Policy of Endo International plc Relating to Insider Trading in Company Securities and Confidentiality of Information, and Travel and Expense Policy)   No requirement for shareholder nominee to provide   Must be provided by shareholder nominee
Representation whether shareholder proponent intends to deliver proxy statement or solicit proxies   No requirement for shareholder proponent to provide   Must be provided by shareholder proponent
Information as may be necessary to determine eligibility of shareholder nominee   No requirement for shareholder proponent to provide   Must be provided by shareholder proponent
Requirement to supplement and update information in member’s notice nominating a person for election or re-election as a Director   No requirement for shareholder proponent to update   Shareholder proponent must update notice so that it is true and correct as of the record date and 15 days prior to the annual general meeting

While the table above is intended to be a useful summary, it is not complete, and therefore, we urge you to read and consider the full text of the amended advance notice provision in the Memorandum and Articles of Association contained in Annex 1 before you cast your vote.

(ii) Amendment to the Articles of Association in response to the enactment of the Companies Act 2014

As discussed in connection with Proposal 4 above, on June 1, 2015, the Companies Act 2014 became effective in Ireland. Although the changes to Irish company law will not impact the Company’s day-to-day operations, the Board of Directors is proposing to make certain amendments to the Company’s Articles of Association in addition to the proposed amendments to the Company’s Memorandum of Association, in order to confirm that the changes to Irish company law effected by the Companies Act 2014 will not have unintended effects on the application of the Company’s Articles of Association.

For example, the Companies Act 2014 contains optional statutory provisions, which will apply automatically to the Company unless such provisions are explicitly excluded from the Company’s Articles of Association. Because many of these optional statutory provisions are already covered by the Company’s current Articles of Association, to avoid any confusion and to continue the Company’s existing approach of setting out regulations governing the Company rather than relying on statutory defaults, the Board of Directors has proposed the Company explicitly exclude such optional statutory provisions from the Company’s Articles of Association. A summary has been prepared listing the optional provisions in the Companies Act 2014 that the Company is proposing to exclude from the Company’s Articles of Association. Such summary is contained in Part I of Annex 2.

One such optional statutory provision that the Board of Directors is not proposing to exclude is the provision enabling shareholders holding not less than 50% of the paid up share capital of the Company to convene an extraordinary general meeting of the Company. This provision benefits shareholders by providing them the enhanced ability to cause an extraordinary general meeting of the Company by eliminating the requirement that the Board of Directors must call such a meeting.

 

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Part II of Annex 2 contains a summary of the other administrative amendments that the Board of Directors is proposing to make to the Company’s Articles of Association to address the enactment of the Companies Act 2014. Some of these amendments are for the purposes of addressing inconsistencies between the existing Articles of Association and the provisions of the Companies Act 2014. Other amendments are made to update legislative references in keeping with the equivalent provisions of the Companies Act 2014.

A copy of the Articles of Association, in the form proposed to be amended by the following special resolution, and which captures the above two categories of proposed changes, is attached to this proxy statement, as Annex 1. While the tables contained in Parts I and II of Annex 2 are intended to be useful summaries, they are not complete, and therefore, we urge you to consider the full text of the amended Memorandum and Articles of Association contained Annex 1 before you cast your vote.

Vote Required

The affirmative vote of at least 75% of the issued ordinary shares entitled to vote and be represented at the Annual Meeting in person or by proxy will be required to approve the amendment of the Company’s Articles of Association. In addition, the adoption of Proposal 5 is subject to and conditioned upon shareholder approval of Proposal 4.

Accordingly, the Board of Directors is requesting that the shareholders approve the following resolution as a special resolution of the Company:

“RESOLVED as a special resolution that, subject to and conditional upon Proposal 4 being passed, the Articles of Association of the Company, in the form produced to the meeting (a copy of which are marked ‘X’ for identification and as shown in Annex 1 of the proxy statement), be adopted in substitution for, and to the exclusion of, the existing Articles of Association of the Company.”

 

The Board of Directors recommends a vote FOR the amendment of the Company’s Articles of Association in the manner described above.

 

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Proposal 6: Approval of an Amendment to the 2015 Stock

Incentive Plan

On June 9, 2015, shareholders approved the Endo International plc 2015 Stock Incentive Plan (the “Plan”). On March 20, 2016, our Board of Directors approved, subject to shareholder approval at the Annual Meeting, an amendment to the Plan. The reasons for the amendment are to limit the value of equity grants that may be made to each non-employee director of the Company to $750,000 and to make certain technical updates to reflect changes in accounting rules. The text of the proposed amendment to the Plan is set forth in Annex 3 to this Proxy Statement.

As part of this proposal, we performed a detailed review of the Plan together with our compensation advisors. The Board of Directors believes that the proposed amendment promotes good compensation governance practices in support of shareholder interests. If our shareholders do not approve the Amendment, the current Plan (prior to such proposed amendment) will remain in effect.

Description of Material Features of the Plan

Except as set forth in the proposed amendment, the Plan is identical to the version approved by shareholders in 2015. The material features of the Plan are summarized below, which is qualified in its entirety by the full text of the Plan.

Administration. The Plan is administered by the Compensation Committee, who was appointed by our Board of Directors. The Compensation Committee has the authority, in its sole discretion, subject to and not inconsistent with the express terms and provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or as necessary or advisable. The Compensation Committee may delegate all or any part of its authority under the Plan to an employee, employees or committee of employees. All decisions, determinations, and interpretations of the Compensation Committee are final and binding, and no member of the Compensation Committee will be liable for any action taken or determination made in good faith with respect to the Plan or any award.

Eligibility. Awards pursuant to the Plan may be granted to employees of the Company, including officers and directors who are employees, to non-employee directors, and to consultants of the Company. Incentive stock options may only be granted to Company employees (including officers and directors who are also employees). All of our non-employee directors participate in the Plan, and the number of employees who participate in the Plan is approximately 700.

Shares Available. As of April 14, 2016, [X] shares of Company stock are reserved for issuance under the Plan, subject to adjustment for a change in capitalization. Of the total shares reserved for issuance under this Plan, no more than half of such shares may be issued as “full value awards”. The shares may be authorized but unissued Company stock or authorized and issued Company stock held in the Company’s treasury. If any shares subject to an award are forfeited, cancelled, exchanged or surrendered or if an award terminates or expires without a distribution of shares to the participant, the shares of stock with respect to such award will, to the extent of any such forfeiture, cancellation, exchange, surrender, withholding, termination or expiration, again be available for awards under the Plan except that any shares of Company stock surrendered or withheld as payment of either the exercise price of an award and/or withholding taxes in respect of an award will not again be available for awards under the Plan. In no event may the total number of shares of Company stock subject to awards awarded to any one participant during any tax year of the Company, exceed one million five hundred thousand (1,500,000) shares (based on highest levels of performance resulting in maximum payout), subject to adjustment for certain transactions. The proposed amendment will also limit the value of annual equity awards to non-employee director participants, as noted above.

Description of Awards. The Plan provides for the grant of stock options, stock appreciation rights, shares of restricted stock, stock bonus, performance awards or other share-based or cash-based awards. Subject to earlier vesting on certain events, as described below, no award (or portion of an award) granted under the Plan provides for vesting prior to the first anniversary of its date of grant. In addition, as described below, awards that are subject to time-based vesting conditions are generally required under the Plan to vest over a 3-year period. However, awards that result in the issuance of an aggregate of up to 5% of the shares of common stock available under the Plan may be granted under the Plan without regard to such minimum vesting provisions.

Stock Options. Options granted under the Plan may be incentive stock options meeting the definition of an incentive stock option under Section 422 of the Internal Revenue Code or options which do not qualify as incentive stock options (referred to as nonqualified options). An award will be evidenced by an award agreement that specifies the option price, duration of the option, the number of shares to which the option pertains, termination and transferability rights and other provisions as the Compensation Committee may determine to be appropriate. The option price for each grant will be at least equal to the fair market value of the shares subject to the option on the grant date of the option. The date on which the Compensation Committee adopts a resolution granting an option will be considered the grant date of the option, unless such resolution specifies a later date. No option may be exercised later than the tenth anniversary date of its grant. Notwithstanding the foregoing, if the vesting condition for any option (other than options excluded from the minimum vesting requirement) relates exclusively to the passage of time and continued employment, such time period will not be less than 36 months, with no more than 33 1/3% of the award vesting every 12 months from the date of the award (subject to earlier vesting on certain events described below). If the vesting condition for any award relates to the attainment of specified performance goals, such award will vest over a performance period of not less than one year (subject to earlier vesting on certain events described below).

 

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Stock Appreciation Rights (SARs). The Compensation Committee may grant SARs under the Plan, either in tandem with stock options or freestanding and unrelated to options. Tandem SARs may be exercised only when the related option is exercisable. Freestanding SARs may be exercised upon such terms and conditions established by the Compensation Committee. Each SAR will be evidenced by an award agreement that will specify the grant price, the term of the SAR and other provisions as the Compensation Committee or board may determine to be appropriate. In no event will the appreciation base of the ordinary shares subject to the SAR be less than the fair market value of the shares on the date of grant. The term of the SAR may not exceed ten (10) years. Notwithstanding the foregoing, if the vesting condition for any SAR (other than SARs excluded from the minimum vesting requirement) relates exclusively to the passage of time and continued employment, such time period will not be less than 36 months, with no more than 33 1/3% of the award vesting every 12 months from the date of the award (subject to earlier vesting on certain events described below). If the vesting condition for any award relates to the attainment of specified performance goals, such award will vest over a performance period of not less than one year (subject to earlier vesting on certain events described below). Upon exercise of a SAR, a participant will be entitled to receive payment from the Company in an amount determined by multiplying (i) the difference between the fair market value of a share on the exercise date and the appreciation base of the SAR, by (ii) the number of shares with respect to which the SAR is exercised.

Restricted Stock and Stock Bonus. The Compensation Committee may grant restricted stock awards, alone or in tandem with other awards under the Plan, subject to such restrictions, terms and conditions, as the Compensation Committee may determine in its sole discretion and as may be evidenced by the applicable agreements. The vesting of a restricted stock award granted under the Plan may be conditioned upon the completion of a specified period of employment or service with the Company or any subsidiary, upon the attainment of specified performance goals, and/or upon such other criteria as the Compensation Committee may determine in its sole discretion. Notwithstanding the foregoing, if the vesting condition for any award that is settled in Company stock, such as restricted stock awards (full value awards) (other than full value awards excluded from the minimum vesting requirement) relates exclusively to the passage of time and continued employment, such time period will not be less than 36 months, with no more than 33 1/3% of the award vesting every 12 months from the date of the award (subject to earlier vesting on certain events described below). If the vesting condition for any full value award (including award of restricted stock) relates to the attainment of specified performance goals, such full value award will vest over a performance period of not less than one year (subject to earlier vesting on certain events described below). Each agreement with respect to a restricted stock award will set forth the amount (if any) to be paid by the participant with respect to the award and when and under what circumstances such payment is required to be made. The Compensation Committee may grant stock bonus awards, alone or in tandem with other awards under the Plan, subject to such terms and conditions as the Compensation Committee may determine in its sole discretion and as may be evidenced by the applicable agreement.

Performance Awards. The Compensation Committee may grant performance awards, alone or in tandem with other awards under the Plan, to acquire shares of Company stock in such amounts and subject to such terms and conditions as the Compensation Committee may from time to time in its sole discretion determine, subject to the terms of the Plan. To the extent necessary to satisfy the short-term deferral exception to Section 409A of the Internal Revenue Code, unless the Compensation Committee will determine otherwise, the Performance Awards will provide that payment will be made within 2 1/2 months after the end of the year in which the Participant has a legally binding vested right to such award. No dividends or dividend equivalents will be paid in respect of unvested performance awards. In the event that the Compensation Committee grants a performance award or other award (other than a nonqualified option or incentive stock option) that is intended to constitute qualified performance-based compensation within the meaning Section 162(m) of the Internal Revenue Code, the following rules will apply: payments under the award will be made solely on account of the attainment of one or more objective performance goals. The performance goals must be established in writing by the Compensation Committee not later than 90 days after the commencement of the period of service to which the award relates (but in no event after 25 percent of the period of service has elapsed). The performance goal(s) to which the award relates may be based on one or more of the business criteria set forth in the Plan.

Other Stock- or Cash-Based Awards. The Compensation Committee is authorized to grant other stock-based awards or other cash-based awards, as deemed by the Compensation Committee to be consistent with the purposes of the Plan. To the extent necessary to satisfy the short-term deferral exception to Section 409A of the Internal Revenue Code, unless the Compensation Committee will determine otherwise, the awards will provide that payment will be made within 2 1/2 months after the end of the year in which the participant has a legally binding vested right to such award. With respect to other cash-based awards intended to qualify as performance based compensation under Section 162(m) of the Internal Revenue Code, (i) the maximum value of the aggregate payment that any participant may receive with respect to any such other cash-based award that is an annual incentive award is $5,000,000, (ii) the maximum value of the aggregate payment that any participant may receive with respect to any such award that is a long-term cash incentive award is the amount set forth in clause (i) above multiplied by a fraction, the numerator of which is the number of months in the performance period and the denominator of which is twelve, (iii) the achievement of the awards will be based on the business criteria listed under “Performance Awards” above, and (iv) the additional rules described above applicable to awards intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code will apply. The Compensation Committee may establish such other rules applicable to the other stock- or cash-based awards to the extent not inconsistent with Section 162(m) of the Internal Revenue Code.

Termination of Service. Unless the applicable award agreement provides otherwise or the Compensation Committee in its sole discretion determines otherwise, the Plan generally provides for the treatment of outstanding awards in the event of a

 

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termination of a participant’s service with or without cause (as such term is defined in the Plan), for good reason (or any like term as defined under a participant’s employment agreement), or as a result of voluntary retirement, death or disability.

Effect of Change in Control. Unless the applicable award agreement provides otherwise, in the event of a Change in Control (as such term is defined in the Plan), and in accordance with the requirements of Section 409A of the Internal Revenue Code:

  ¡  

For any award that is assumed in connection with a Change in Control, in the event of a termination of a participant’s service by the Company without cause, during the 24-month period following the Change in Control, at the time of termination, all awards held by the participant will vest, and any performance conditions imposed on the awards will be deemed to be achieved at target levels.

  ¡  

For any award that is not assumed in connection with a Change in Control, immediately upon the occurrence of the Change in Control, all awards held by the participant will become fully vested and any performance conditions imposed on the awards will be deemed to be achieved at target levels.

  ¡  

An award will be considered assumed if, following the Change in Control, the award remains subject to the same terms and conditions that were applicable to the award immediately prior to the Change in Control except that, if the award related to shares of Company stock, the award instead confers the right to receive ordinary shares of the acquiring entity.

  ¡  

In the event of a Change in Control, except as would otherwise result in adverse tax consequences under Section 409A of the Code, the Company may provide that each award will, immediately upon the occurrence of a Change in Control, be cancelled in exchange for a payment in cash or securities in an amount equal to (x) the excess of the consideration paid per share of Company stock in the Change in Control over the exercise price (if any) per share of Company stock subject to the award multiplied by (y) the number of shares granted under the award.

Amendment or Termination of the Plan. Subject to certain limitations, the Board of Directors or the Compensation Committee may, at any time, suspend or terminate the Plan or revise or amend it in any respect whatsoever; provided, however, neither the Board of Directors, the Compensation Committee nor their respective delegates will have the authority to (a) re-price (or cancel and re-grant) any option or, if applicable, other award at a lower exercise, base or purchase price, or (b) cancel underwater options or stock appreciation rights in exchange for cash (at any time when the fair market value as defined in the Plan of the Company stock is less than the exercise price of the option or stock appreciation right) without first obtaining the approval of the Company’s shareholders.

Federal Income Tax Consequences of the Company’s 2015 Stock Incentive Plan. The following discussion of certain relevant federal income tax effects applicable to stock options and other stock-based awards granted under the plan is a summary only, and reference is made to the Internal Revenue Code for a complete statement of all relevant federal tax provisions.

Options. With respect to nonqualified options (NSO), the participant will recognize no income upon grant of the option, and, upon exercise, will recognize ordinary income to the extent of the excess of the fair market value of the shares on the date of option exercise over the amount paid by the participant for the shares. Upon a subsequent disposition of the shares received under the option, the participant generally will recognize capital gain or loss to the extent of the difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition.

In general, no taxable income is realized by a participant upon the grant of an incentive stock option (“ISO”). If ordinary shares are issued to a participant (option shares) pursuant to the exercise of an ISO granted under the plan and the participant does not dispose of the option shares within the two-year period after the date of grant or within one year after the receipt of such option shares by the participant (a disqualifying disposition), then, generally (i) the participant will not realize ordinary income upon exercise and (ii) upon sale of such option shares, any amount realized in excess of the exercise price paid for the option shares will be taxed to such participant as capital gain (or loss). The amount by which the fair market value of ordinary shares on the exercise date of an ISO exceeds the purchase price generally will constitute an item which increases the participant’s “alternative minimum taxable income.”

If option shares acquired upon the exercise of an ISO are disposed of in a disqualifying disposition, the participant generally would include in ordinary income in the year of disposition an amount equal to the excess of the fair market value of the option shares at the time of exercise (or, if less, the amount realized on the disposition of the option shares), over the exercise price paid for the option shares. Subject to certain exceptions, an option generally will not be treated as an ISO if it is exercised more than three months following termination of employment. If an ISO is exercised at a time when it no longer qualifies as an ISO, such option will be treated as an NSO as discussed above.

In general, we will receive an income tax deduction at the same time and in the same amount as the employee recognizes ordinary income.

Payment of Option Price in Shares. If an option is exercised through the use of Company stock previously owned by the participant (subject to applicable law), such exercise generally will not be considered a taxable disposition of the previously owned shares and, thus, no gain or loss will be recognized with respect to such previously owned shares upon such exercise. The amount of any built-in gain on the previously owned shares generally will not be recognized until the new shares acquired on the option exercise are disposed of in a sale or other taxable transaction. However, if the previously owned shares were acquired on the exercise of an incentive stock option and the holding period requirement for those shares was not satisfied at the time they were used to exercise a stock option, such use would constitute a disqualifying disposition of such previously owned shares resulting in the recognition of ordinary income in the amount described above.

 

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SARs. The recipient of a grant of SARs will not realize taxable income and we will not be entitled to a deduction with respect to such grant on the date of such grant. Upon the exercise of an SAR, the recipient will realize ordinary income equal to the amount of cash (including the amount of any taxes withheld) and the fair market value of any shares received at the time of exercise. In general, we will be entitled to a corresponding deduction, equal to the amount of income realized.

Restricted Stock. A participant who receives a grant of restricted stock will not recognize any taxable income at the time of the award, provided the shares are subject to restrictions (that is, they are nontransferable and subject to a substantial risk of forfeiture). A participant’s rights in restricted stock awarded under the plan are subject to a substantial risk of forfeiture if the rights to full enjoyment of the shares are conditioned, directly or indirectly, upon the future performance of substantial services by the participant. However, the participant may elect under Section 83(b) of the Internal Revenue Code to recognize compensation income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, determined without regard to the restrictions. If the participant does not make a Section 83(b) election within 30 days of receipt of the restricted shares, the fair market value of the shares on the date the restrictions lapse, less any amount paid by the participant for such shares, will be treated as compensation income to the participant and will be taxable in the year the restrictions lapse. We generally will be entitled to a compensation deduction for the amount of compensation income the participant recognizes

Other Types of Awards. With respect to other awards under the Plan, generally when the participant receives payment with respect to an award, the amount of cash and fair market value of any other property received will be ordinary income to the participant, and the Company generally will be entitled to a tax deduction in the same amount.

New Plan Benefits

Future grants under the Plan will be made at the discretion of the Compensation Committee and, accordingly, are not yet determinable. In addition, benefits under the Plan will depend on a number of factors, including the fair market value of our ordinary shares on future dates and the exercise decisions made by the participants. Consequently, at this time, it is not possible to determine the future benefits that might be received by participants receiving discretionary grants under the Plan. The following table reflects annual awards made under the Plan in 2016.

 

NEW PLAN BENEFITS  
     2015 Stock Incentive Plan  
Name and Position   Dollar Value ($)(1)      Number of Units  

Rajiv De Silva, President and Chief Executive Officer

  $ 12,516,354         317,239   

Suketu P. Upadhyay, Executive Vice President & Chief Financial Officer

  $ 3,310,505         89,936   

Paul V. Campanelli, President, Par Pharmaceutical

  $ 2,773,310         75,342   

Matthew J. Maletta, Executive Vice President, Chief Legal Officer

  $ 1,331,238         36,165   

Susan Hall, Executive Vice President, Chief Scientific Officer and Global Head of Research & Development and Quality

  $ 1,563,569         42,477   

Executive Group

  $ 6,549,503         179,005   

Non-Executive Director Group

  $ 3,095,008         61,629   

Non-Executive Officer Employee Group

  $ 42,079,578         1,500,002   

 

(1)

Award levels established at the time of grant are based on the grant expected values, which is derived from Endo’s closing price at the time of grant. For accounting and proxy reporting purposes, the LTI amounts reported above represent the grant date fair value under ASC 718.

Current Equity Compensation Plan

The following information relates to plans in effect as of December 31, 2015 under which equity securities of Endo may be issued to employees and directors.

 

     Column A     Column B     Column C  
Plan Category   Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
    Weighted-average
exercise price of
outstanding options,
warrants and rights(1)
    Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in Column A)
 

Equity compensation plans approved by security holders

    4,558,977      $ 51.48        9,288,514   

Equity compensation plans not approved by security holders

                    
 

 

 

   

 

 

   

 

 

 

Total

    4,558,977      $ 51.48        9,288,514   

 

(1)

Excludes shares of restricted stock units outstanding

As of April 14, 2016, the Company had [X] ordinary shares outstanding, and under the Endo International plc 2004, 2007, 2010, 2015 and Assumed Stock Incentive Plans: (i) [X] stock options outstanding (vested and unvested), with a weighted average exercise price of $[X] and a weighted average remaining term of [X] years; and (ii) [X] shares of unvested restricted

 

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stock and restricted stock units outstanding. As of April 14, 2016, [X] shares were available for grant under the Endo International plc 2015 Stock Incentive Plan, which is the sole equity compensation plan under which the Company grants equity awards. The closing price of the Company’s ordinary shares on April 14, 2016 was $[X].

Vote Required

The affirmative vote of a majority of the votes cast at the Annual Meeting in person or by proxy will be required to approve the amendment to the Plan. Abstentions will not be considered votes cast in respect of the proposal.

 

The Compensation Committee and Board of Directors recommends a vote FOR the approval of the amendment to the Endo International plc 2015 Stock Incentive Plan.

 

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Compensation Discussion and Analysis

 

 

    Executive Summary

 

 

 

Compensation Philosophy

 

Pay-for-performance underlies Endo’s compensation philosophy. The Compensation Committee believes that the most effective executive compensation program is one that is designed to provide incentives that advance the interests of shareholders and deliver levels of compensation that are commensurate with performance. Endo’s compensation philosophy is designed to support our business strategy by attracting and retaining highly-talented individuals and motivating them to achieve competitive corporate performance, while embracing the Company’s Key Values and behaviors.

 

The following summarizes Endo’s financial, strategic and market performance under Mr. De Silva’s leadership:

 

         
   

 

 

Strategic Vision

 

 

¡    To become a leading global specialty pharmaceutical company that improves lives while creating value:

 

¡    Top tier shareholder value creator

 

¡    Leadership in areas with relevance to patients, physicians and customers

 

¡    Focus on areas where we can create value:

 

¡    Growth in U.S. Branded Pharmaceuticals, U.S. Generic Pharmaceuticals and International Pharmaceuticals

 

¡    Target specialized segments to gain leadership in branded and generic pharmaceuticals

 

¡    Create value through differentiated operating model:

 

¡    Operating structure, scope and size to fuel robust and sustainable growth

 

¡    Durable financial structure strengthened by favorable effective tax and prudent allocation of capital

 

¡    Increasing operating efficiency and margins

 

¡    Achieve sustainable growth:

 

¡    Expanded portfolios in both branded and generic pharmaceuticals leading to double digit organic top- and bottom-line growth

 

¡    Dual focus on organic growth and selective M&A opportunities

 

¡    Invest in de-risked R&D pipeline

   

 

 

Strategic Results

 

¡    Advanced Endo’s strategic transformation into a leading specialty pharmaceutical company that improves lives while creating value

¡    Delivered solid financial results in 2015 with the Company positioned for double-digit underlying growth over the mid- to long-term:

¡    Achieved 37% increase in total revenues compared to 2014 with strong organic and overall growth in Branded, Generic and International Pharmaceuticals

¡    Exceeded budgeted diluted earnings per share from continuing operations and exceeded the top end of the EPS guidance range, with an overall increase of 28%

¡    Achieved 63% increase in adjusted income from continuing operations compared to 2014

¡    Completed value creating M&A transactions:

¡    Acquired Auxilium Pharmaceuticals revitalizing Branded portfolio and expanding R&D pipeline

¡    Completed the acquisition of Par Pharmaceutical creating a top-four U.S. generics company by market share and a powerful platform for future growth and further strategic M&A

¡    Divested AMS Men’s Health business consistent with specialty pharmaceutical focus

¡    Expanded the International Pharmaceuticals business unit further diversifying the Company’s financial profile

¡    Expanded and de-risked R&D pipeline in both Branded and Generic Pharmaceuticals capable of fueling long-term organic growth

¡    Gained approval for BELBUCA™ and received updated XIAFLEX® Label with Recurrence and Retreatment Data in Patients with Dupuytren’s Contracture, while selecting and initiating studies for new indications

¡    Extended U.S. rights for VOLTAREN® Gel and gained rights to an authorized generic through 2023

¡    Achieved favorable OPANA® ER ruling upholding two patents and removing generic versions from the market

¡    Continued to build Irish infrastructure producing a favorable effective tax rate leading to excellent cash flow conversion and balance sheet de-levering

 

 

 
         
   

 

Financial Results & Market Performance

 

LOGO

 
         

 

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    Executive Summary

 

   

Program Objectives and Elements of Executive Compensation

 

Our executive compensation program seeks to:

¡     Align pay practices and incentive structures with long-term shareholder value;
¡     Provide appropriate compensation for achieving annual results while fostering a long-term performance orientation;
¡     Link compensation with Company and individual performance;
¡     Reward high performance as measured against the Company’s strategic and business plans;
¡     Reflect the competitive market for acquiring and retaining top talent; and
¡     Mitigate pay practice risks through a balanced approach to performance-based compensation.

 

In support of these objectives, the Company’s compensation programs consist of elements designed to complement each
other and reward achievement of short-term and long-term objectives tied to the Company’s performance through the
establishment and achievement of strategic operating metrics or as a function of the Company’s total shareholder return.
In support of our compensation philosophy, we have chosen selected metrics to align employee compensation, including
compensation for the NEOs, to the Company’s business strategy and strategic operating results. The three principal
components of the Company’s total compensation are base salary, annual cash incentive compensation (IC) and equity-
based LTI compensation, as discussed in greater detail under the section “Executive Compensation Program”.

 

Competitive Considerations

 

In making compensation decisions with respect to each element of compensation, the Compensation Committee consid
ers the competitive market for executives and compensation levels provided by comparable companies. The Compensa
tion Committee reviews the compensation practices at companies with which it competes for talent, including businesses
engaged in activities similar to those of the Company. While we do not believe that it is appropriate to establish
compensation levels based primarily on benchmarking, we believe that information regarding pay practices at other
companies is nevertheless useful in two respects. First, we recognize that our compensation practices must be com
petitive in the marketplace. Second, independent marketplace information is one of the many factors that we consider in
assessing the reasonableness of compensation.

 

The Compensation Committee generally aligns target executive compensation at the median of compensation packages for
executives in similar positions and with similar responsibilities and experience at similar companies of comparable size with the
opportunity for top quartile actual compensation based upon individual and Company performance. We recognize, however,
that positions with similar titles are not always comparable in terms of responsibility to such positions at the Company. The
Compensation Committee’s choice of this target percentile reflects the Company’s consideration for our shareholders’ inter
ests in paying what is competitive to achieve our corporate goals, while conserving cash and equity as much as practicable.

 

We believe that, given our compensation philosophy and objectives, compensation targeted at the median of similar-
situated companies with the opportunity for top quartile total compensation based upon performance is generally suffi
cient to retain our current executive officers and to hire new executive officers when and as required. In setting
compensation for the NEOs, the Compensation Committee considers comparative market data requested from Hay
Group, its compensation consultant. In gathering relevant competitive market compensation data, the Compensation
Committee approved the use of a sample of companies with similar operations as Endo.

 

We refer to all of these sample companies as the “Pay Comparator Companies.” The Committee believes that Endo com
petes with the Pay Comparator Companies for talent and for shareholder investment. In assessing the relevance of the
Pay Comparator Companies, Hay Group evaluates the appropriateness based on several key criteria in an effort to identify
comparator companies with the most appropriate business fit. These factors include company size (in terms of both rev
enue and market cap), industry/business sector, operating complexity, location, talent market, customer base and other
relevant factors, recognizing that not all peer companies will match all criteria and not all criteria are of equal importance.

 

 

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    Executive Summary

 

   
 

 

The Pay Comparator Companies typically have similar executive officer positions, however, the Compensation Committee does not attempt to set each compensation element for each executive within a particular range as it relates to the Pay Comparator Companies. Instead, the Compensation Committee uses market comparisons as one factor in making compensation decisions. Among other factors considered when making individual executive compensation decisions include individual contribution and performance, reporting structure, complexity and importance of role and responsibilities, leadership and growth potential.

 

Hay Group makes regular recommendations to the Committee regarding the recalibration of the Pay Comparator Companies referenced. As a result of this annual review, Endo recalibrated the Pay Comparator Companies in response to continuing acquisition activity within the industry, Endo’s decision to divest our AMS device businesses (now reported as discontinued operations), and the need to include organizations that were more relevant to Endo’s size and business composition. Industry consolidation continues to present significant challenges in Endo’s selection process. The continued consolidation of viable peer companies and loss of many similarly sized competitor companies during the past few years has forced Endo to consider comparator companies that fall outside of the normal size parameters in order to include organizations relevant to Endo’s business. This includes companies both larger and smaller in size, in an effort to include a balanced and fair assessment of the range of competitive pay levels. Ultimately, Endo believes it is imperative that the comparator companies align with Endo’s customer base and market for key talent in order to establish a reasonable assessment of competitive pay levels for our NEOs.

 

The Compensation Committee approved Pay Comparator Companies for 2015 are listed in the table below:

 

 
    2015 Pay Comparator Companies
 

Alexion Pharmaceuticals Inc.

 

Mallinckrodt plc

 

Alkermes plc

 

Mylan NV

 

Allergan plc

 

Perrigo Co. plc

 

Biogen Inc.

 

Regeneron Pharmaceuticals

 

BioMarin Pharmaceutical Inc.

 

United Therapeutics Corporation

 

Celgene Corporation

 

Valeant Pharmaceuticals Int’l

 

Jazz Pharmaceuticals plc

 

Vertex Pharmaceuticals Inc.

 

 

Say-on-Pay Consideration

 

In establishing 2016 compensation, the Compensation Committee also considered the results of the most recent shareholder advisory vote on executive compensation (the say-on-pay vote) at the Company’s Annual Meeting held in June 2015, where over 82% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. Following the Company’s shareholder outreach initiatives in 2015, the Compensation Committee enhanced the Company’s disclosure related to performance metrics and how performance is measured, and following the 2015 say-on-pay vote, the Compensation Committee approved the transition from an absolute stock appreciation metric to relative TSR performance criteria for performance-based LTI awards. The Compensation Committee will continue to consider the results of future say-on-pay votes when making executive compensation decisions and policies.

 

Pay Risk and Governance

 

At least on an annual basis, the Company conducts an assessment of the potential risks associated with the Company’s compensation arrangements, policies and practices. The assessment is conducted by Hay Group and 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;

 

 

 

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    Executive Summary

 

 
 

 

¡     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.

 

The Compensation Committee also reviews the Company’s compensation programs that allow for variable payouts. A key consideration is the establishment of an appropriate mix of performance metrics. The Compensation Committee also oversees the plans so that they 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 assessment, several control and design features of the Company’s compensation program that are intended to mitigate the risk of excessive risk-taking are evaluated. Risk profiles are also evaluated on an on-going basis by the Company’s management team as new program designs are considered.

 

Based on the process described above, it was concluded that the potential risks associated with the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on Endo. The Compensation Committee 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.

 

Company Actions

 

In response to the evolving nature of our business structure and our goal to strengthen our executive pay decisions, emphasis has been placed on continuing to enhance the effectiveness of our executive compensation policies in increasing shareholder value creation and preservation. The following reflects the leading practices implemented and maintained by the Company in an effort to achieve pay-for-performance, while maintaining good corporate governance:’

 

 
    Item   Actions
  Competitive

Considerations

 

¡   “Pay Comparator Companies” updated and maintained to compare NEO total compensation levels; and

¡   Conduct assessments at least annually of the positioning of NEO total compensation levels against the Pay Comparator Companies to assess competitive external market alignment in the industry sectors in which Endo competes for talent.

  Incentive
Compensation
 

¡   Short- and long-term incentive programs designed to closely link pay and performance with the objective of enhancing shareholder value;

¡   Equity plans prohibit the re-pricing of equity awards without shareholder approval and do not allow for cash buyouts of underwater options;

¡   “Double trigger” change in control provisions in our 2015 Stock Incentive Plan;

¡   LTI awards granted to employees under the 2015 Stock Incentive Plan are generally subject to three year vesting conditions, subject to earlier vesting on certain events;

¡   PSU performance criteria based on relative 3-year TSR against a custom index of pharmaceutical companies, with maximum payout levels based on 3-year compounded annual growth rate (CAGR) stock price performance;

¡   PSUs for Mr. De Silva account for 75% of LTI value with remaining LTI in the form of stock options; 100% tied to value creation;

¡   PSUs awarded to senior management accounts for 50% of LTI, resulting in 75% of equity compensation tied to value creation;

¡   PSU eligibility in place for all Vice President-level positions account for 33.3% of LTI Value; 66.6% tied to value creation to further strengthen the focus on shareholder value creation and preservation; and

¡   Stock option eligibility in place for middle-management positions, allowing for 50% of the total LTI value to be tied to value creation.

  Employment

Agreements

 

¡   “Golden parachute” gross-up payments related to excise tax liabilities resulting from a change in control of the Company prohibited; and

¡   Except as required by local law, NEO employment agreements with automatic renewal provisions are disallowed.

  Risk
Management
 

¡   Annual assessments conducted of the potential risks associated with compensation arrangements, policies and practices to confirm that they are not reasonably likely to have material adverse effect on Endo;

¡   Compensation recovery policy (clawback) relating to repayment of cash incentive awards by an executive in the event of a restatement of the Company’s financial results;

¡   Hedging and pledging of Company stock by employees and/or non-employee Directors is prohibited;

¡   Stock ownership guidelines for both non-employee Directors and for executive management to align their interests with the interests of Endo shareholders (requiring non-employee Directors not to sell shares until guidelines are attained);

¡   Shareholder approval sought for individual share limitations for non-employee Directors (as noted in the proposed amendment to the 2015 Stock Incentive Plan described earlier in Proposal 6); and

¡   The Compensation Committee retained Hay Group as its independent compensation consultant.

 

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Executive Compensation Program

The Company’s primary objectives with respect to the development and implementation of executive compensation programs are to attract, retain and motivate highly qualified talent, as well as align executive compensation with the Company’s overall operating performance and business strategies, closely linked to the enhancement of shareholder value. The Compensation Committee believes that the most effective executive compensation program is one that is designed to recognize the achievement of specific annual, long-term and strategic goals of the Company, rewarding executives who contribute to meeting and exceeding the Company’s business objectives, with the ultimate objective of improving shareholder value.

The three principal components of the Company’s total compensation are: base salary, annual cash incentive compensation 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 greatest ability to influence the Company’s performance—should be performance-based.

 

LOGO

In making decisions with respect to any element of a named executive officer’s compensation, the Compensation Committee 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 Compensation 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 performance. The Compensation Committee believes that its compensation programs align executive and shareholder interests by effectively calibrating compensation payout levels with 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 annual base salaries in order to attract and retain them. While the base salary component of our executive officer compensation program is primarily designed to provide the baseline level of compensation to executive officers, individual performance is also a key consideration when establishing appropriate base salary levels, further supporting the Company’s pay-for-performance philosophy.

Considerations. Salaries for the NEOs are determined initially by each individual’s employment agreement which are described under “Employment and Change in Control Agreements; Severance 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 Pay Comparator Companies;

  ¡  

the expertise and competencies of the individual executive;

  ¡  

the competitiveness of the market for the executive’s services;

  ¡  

internal review of the executive’s compensation, both individually and relative to other NEOs;

  ¡  

the recommendations of the President and Chief Executive Officer (except in the case of the President and Chief Executive Officer’s own compensation); and

  ¡  

individual performance of the NEO, which includes:

  ¡  

achievement of individual annual goals and objectives, the risks and challenges involved, and the impact of the results;

  ¡  

performance of day-to-day responsibilities;

  ¡  

increases in competencies and skill development;

  ¡  

value of the NEO’s contribution to function and Company goal achievement; and

  ¡  

behaviors aligned with Endo Key Values.

Base salaries are generally reviewed annually. In reviewing salaries, the Compensation Committee adjusts salaries from time to time to realign salaries with market levels, individual performance and incumbent experience. The Compensation Commit-

 

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tee also considers salaries relative to those of others within the Company and may, on occasion, make adjustments to salaries or other elements of total compensation, such as incentive compensation and long-term incentive targets, where such an adjustment would correct a compensation imbalance, as the Compensation Committee deems appropriate.

2015 Decisions Regarding Base Salary. In November 2015, as part of the Compensation Committee’s annual review of compensation, Hay Group provided the Compensation Committee with a market assessment of the competitive compensation for the Company’s executive officers. This assessment included reviewing the Pay Comparator Companies and:

  ¡  

establishing a benchmark match for each of the positions;

  ¡  

gathering and analyzing competitive compensation from relevant labor markets; and

  ¡  

developing competitive market medians of compensation for the positions.

Based on the competitive market data referred to above, the Compensation Committee developed, with the assistance of Hay Group, market medians of compensation for each of Endo’s compensation elements (base salary, target annual incentive compensation, and expected value of long-term incentive compensation) and then compared each NEO’s current compensation to the market median for each data sample. The market data and the performance of each of Endo’s NEOs are reviewed each year, but there is no assurance that any of their individual compensation packages will be aligned with the market. Please reference the “Individual Compensation Determination” section for approved salary actions.

Performance-Based Annual Cash Incentive Compensation

Purpose. The compensation program provides for an annual cash incentive that directly reinforces the Company’s pay-for-performance approach. This incentive compensation, or IC, program is a short-term performance-based incentive plan that rewards the achievement of annual goals and objectives, as well as longer-range strategic goals. The Company and individual performance goals, and the resulting payments, are pre-established and formulaic. The objective of the program is to compensate individuals based on the achievement of specific goals that are intended to correlate closely with shareholder value.

The Compensation Committee will annually assess each NEO’s achievement against the Company’s annual pre-established and formulaic objectives, while operating within the structure of the Internal Revenue Code Section 162(m) compliant IC program which allows for a maximum bonus equal to 225% of the target bonus amount and the use of negative Committee discretion based on actual performance. The following illustrates the mechanics underlying the annual cash incentive calculation:

 

LOGO

The respective annual cash IC target for each named executive officer related to 2015, paid in early 2016, is expressed in the graph below.

 

LOGO

Considerations. The annual cash IC program includes relative incentive levels based on the NEO’s accountabilities, performance objectives and impact on Company operations, with target awards established as a percentage of base salary. Each NEO’s target IC bonus is initially established pursuant to his or her employment agreement, which is determined based on all factors that the Compensation Committee deems relevant, including (but not limited to) a review of Pay Comparator Company compensation. The IC metrics are aligned with the Company’s business strategy and the use of adjusted revenue, adjusted diluted EPS, and non-financial metrics are supported by practices observed among our Pay Comparator Companies. The Compensation Committee establishes annual incentive plan targets based upon the Company’s strategic and business plans and then aligns the compensation plan with the Company’s financial guidance for the year. Related to financial guidance, the low end of the plan payout threshold, which is significantly below target compensation awards amounts, is typically aligned with the

 

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low end of the guidance range. Achieving the high end of the bonus payout threshold is contingent upon achieving significantly higher financial performance than the top end of the guidance range. The annual bonus process for our NEOs involves two basic steps:

  ¡  

At the outset of the year, set measurable and pre-established objectives, including:

  ¡  

Company scorecard objectives (including financial, strategic, and operational objectives); and

  ¡  

Individual objectives aligned with the business strategy and Company scorecard for the year.

  ¡  

At the end of the year:

  ¡  

Measure actual performance (individual and Company) against the predetermined Company performance goals and individual performance measures to determine the appropriate award.

These two steps are further described below:

  (1)

Setting Company performance goals. Early in each year, the Compensation Committee, working with management, sets performance goals for the Company. The bonus determination for each NEO is primarily based upon the Company’s performance against these goals. The goals that were established for 2015 are discussed below under “2015 Decisions Regarding Incentive Compensation.”

  (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, to pay incentive compensation at less than or in excess of target levels (e.g., 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 infrequently occurring events reported in the Company’s public filings, but no more than the lesser of 1) the maximum aggregate amount of the annual incentive pool based on a pre-established fixed percentage of consolidated adjusted net income, or 2) a maximum individual amount of $5,000,000 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 in accordance with IRC 162(m)), which is the amount approved by shareholders in accordance with IRC 162(m) of the Internal Revenue Code under Endo’s 2015 Stock Incentive Plan. Further, pursuant 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. The Committee did not implement any IC target changes for the Company’s NEOs for the 2015 performance year.

2015 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 2015. With respect to 2015, the annual award to each of the NEOs was based on the achievement of pre-established corporate goals as well as each NEO’s individual performance and demonstrated leadership. The Compensation Committee established corporate performance goals for 2015, placing emphasis on the Company’s new priorities following the 2015 strategic assessment process. Following this assessment, the performance weightings were calibrated to align the program’s financial goals and strategic, operating and compliance priorities with the Company’s goals for 2015. The performance goals were weighted as follows (specific targets are discussed in the following section heading “2015 Company Performance Against Objectives”):

 

LOGO

The above “scorecard” is structured so that objectives allow for a payout opportunity ranging from 0% to 225% of the target bonus opportunity (commensurate with performance), while operating within the structure of the Internal Revenue Code Section 162(m) compliant IC program which allows for a maximum bonus equal to 225% of the target bonus amount, and the use of negative Committee discretion based on actual performance. Under the IC program, no bonuses will be paid if the Company does not achieve at least 90% of the pre-established annual adjusted net income target. These goals are set so that the Company’s financial performance achieved in each scenario will appropriately fund the cost of the cash incentives. The Compensation Committee, however, has the discretion to withhold annual cash incentives that otherwise would be made to any

 

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employees, including the NEOs, if it determines that overall performance is below performance thresholds. 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 determined 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.

2015 Company Performance Against Objectives. In 2015, the Company continued to make significant progress in establishing Endo as a leading specialty pharmaceutical company through positive organic and transactional growth, and targeted divestiture activity. Endo continued to progress the Company’s Irish infrastructure in 2015, while advancing our corporate tax strategy, expanding Endo’s international capabilities and optimizing our transactional financing capabilities. In determining performance relative to the Company’s annual financial objectives, the design of the annual IC cash bonus plan requires adjustments to be applied to revenue and diluted EPS in order to keep participants from being advantaged or disadvantaged as a result of certain unplanned and unbudgeted events or changes throughout the performance period. These include: a) adjustments for unbudgeted acquisitions during the performance period to include deal model base case revenue and EPS commitments in the Company’s performance targets; b) adjustments for unplanned material changes in share count during the performance period; and c) adjustments to neutralize foreign exchange impact versus budget during the performance period. These adjustments were applied in 2015, consistent with Endo’s prior year approach.

The Company achieved the following financial objective results in 2015 compared to plan and prior year:

Achieved $3.292 billion in adjusted consolidated revenue from operations compared to 2015 plan of $3.362 billion (97.9% of plan), representing an increase of 36% compared to 2014. Adjusted consolidated revenue from operations in 2015 consisted of $3.269 billion of revenue from continuing operations and an adjustment of $23.0 million of revenue related to nonrecurring items. Adjusted consolidated revenue from operations in 2014 of $2.418 billion consisted of revenue from continuing operations of $2.381 billion and an adjustment of $37.0 million related to nonrecurring items.

Achieved adjusted diluted EPS of $4.68 compared to target of $4.37 (107.1% of plan), representing a 30% increase compared to 2014. Adjusted diluted EPS in 2015 of $4.68 consisted of adjusted diluted EPS from continuing operations of $4.66 and an adjustment of $0.02 related to nonrecurring items. Adjusted diluted EPS in 2014 of $3.59 consisted of adjusted diluted EPS from continuing operations of $3.64 and an adjustment of ($0.05) related to nonrecurring items.

The graph below summarizes the Company’s financial results (numbers are reported in millions, other than per share information).

 

LOGO

 

(1)

Adjusted diluted EPS is not prepared in accordance with U.S. generally accepted accounting principles (GAAP) and may be different from non-GAAP financial measures used by other companies. Endo refers to this non-GAAP financial measure in making operating decisions because it believes it provides meaningful supplemental information regarding the Company’s operational performance. For instance, Endo believes that adjusted diluted EPS facilitates its internal comparisons to its historical operating results and comparisons to competitors’ results. The Company includes adjusted diluted EPS in its earnings announcements because it believes it is useful to investors in allowing for greater transparency related to supplemental information used by Endo in its financial and operational decision-making. In addition, Endo has historically reported similar non-GAAP financial measures to its investors and believes that the inclusion of comparative numbers provides consistency in its financial reporting. Further, Endo believes that adjusted diluted EPS may be useful to investors as it is aware that certain of its significant shareholders utilize this measure to evaluate its financial performance. Finally, adjusted diluted EPS is considered by the Compensation Committee of Endo’s Board of Directors in assessing the performance and compensation of its executive officers and other Company employees. Investors are encouraged to review the following reconciliation of adjusted diluted EPS to its most directly comparable GAAP financial measure-diluted EPS.

 

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     2015     2014  

Adjusted diluted EPS from continuing operations

  $                 4.66      $                 3.64   

Upfront and milestone payments to partners

    (0.08     (0.33

Asset impairment charges

    (5.69     (0.14

Acquisition-related and integration items, net

    (0.53     (0.48

Separation benefits and other cost reduction initiatives

    (0.63     (0.16

Excise tax

           (0.35

Amortization of intangible assets

    (2.80     (1.39

Inventory step-up and certain manufacturing costs that will be eliminated pursuant to integration plans

    (1.24     (0.42

Non-cash interest expense related to the 1.75% Convertible Senior Subordinated Notes

    (0.01     (0.08

Loss on extinguishment of debt

    (0.34     (0.20

Certain litigation-related charges, net

    (0.19     (0.27

Costs associated with unused financing commitments

    (0.39       

Acceleration of Auxilium employee equity awards at closing

    (0.19       

Charge related to the non-recoverability of certain non-trade receivables

           (0.06

Net gain on sale of certain early-stage drug discovery and development assets

           0.03   

Other than temporary impairment of equity investment

    (0.09       

Foreign currency impact related to the remeasurement of intercompany debt instruments

    0.13        0.08   

Charge for an additional year of the branded prescription drug fee in accordance with IRS regulations issued in the third quarter of 2014

    (0.02     (0.16

Other income, net

    0.03          

Income tax

    5.88        0.69   

Exclusion of dilutive securities due to net loss

    (0.02       
   

 

 

   

 

 

 

Diluted EPS from continuing operations

  $ (1.52   $ 0.40   
   

 

 

   

 

 

 
   

 

 

   

 

 

 

The following highlights changes in revenue from continuing operations by reportable segment compared to prior year:

U.S. Branded Pharmaceuticals. Revenues from our U.S. Branded Pharmaceuticals segment in 2015 increased 33% to $1,284.6 million from $969.4 million in 2014. This increase was primarily attributable to increased revenues from legacy Endo products such as Voltaren® Gel, Percocet® and Supprelin® LA and products acquired in the acquisition of Auxilium such as XIAFLEX®.

U.S. Generic Pharmaceuticals. Revenues from our U.S. Generic Pharmaceuticals segment in 2015 increased 47% to $1,672.4 million from $1,140.8 million in 2014. This increase was primarily attributable to an additional $382.7 million of revenue due to the acquisition of Par Pharmaceutical. In addition, the Generics business benefited from new product launches, an increase in demand for generic pain products and certain sales incentives offered to customers in the fourth quarter of 2015 in anticipation of additional competitive entrants expected in early 2016. This benefit was partially offset by increased pricing pressures due to increased competition across pain and commoditized products within the legacy Qualitest business.

International Pharmaceuticals. Revenues from our International Pharmaceuticals segment in 2015 increased 15% to $311.7 million from $270.4 million in 2014. This increase was mainly the result of a full year of revenues from Somar, which we acquired in July 2014.

The following highlights changes in adjusted income (loss) from continuing operations before income tax by reportable segment compared to prior year:

U.S. Branded Pharmaceuticals. Adjusted income from continuing operations before income tax in 2015 increased 31% to $694.4 million from $529.5 million in 2014. This increase was primarily attributable to the acquisition of Auxilium and the resulting incremental adjusted income from continuing operations before income tax.

U.S. Generic Pharmaceuticals. Adjusted income from continuing operations before income tax in 2015 increased 60% to $741.8 million from $464.0 million in 2014. In 2015, revenues and gross margins increased primarily due to the DAVA and Par acquisitions and the resulting incremental adjusted income from continuing operations before income tax. In addition, adjusted income from continuing operations before income tax increased as a result of new product launches and an increase in demand for generic pain products.

 

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International Pharmaceuticals. Adjusted income from continuing operations before income tax in 2015 increased 1% to $81.8 million from $80.7 million in 2014. This increase was primarily attributable to the acquisition of Somar and the resulting incremental adjusted income from continuing operations before income tax, partially offset by increased operating expenses associated with the expansion of our global operations.

Corporate unallocated. Corporate unallocated adjusted loss from continuing operations before income tax in 2015 increased 53% to $544.5 million from $355.4 million in 2014. The increase during the year ended December 31, 2015 was primarily attributable to an increase in operating expenses and interest expense due to acquisitions.

Other performance goals are established in alignment with the Company’s strategic, operating and compliance priorities. Further, the goals are developed to deliver strong annual operating performance results, while positioning the Company for longer-term success and enhanced shareholder value. Performance goals are set to be challenging, while reasonably attainable given a concerted effort on the part of the Company’s NEOs and employees in consideration of conditions and trends. NEO compensation is closely aligned with the achievement of the 2015 financial objectives, as well as the Company’s strategic, operating and compliance priorities.

The Compensation Committee reviewed the Company’s achievement of the scorecard objectives set forth above for 2015, and made the following performance determination which applies to each NEO.

 

      Plan Weightings      Payout Percent
(Target 100%)
     Final Company
Performance
 

Adjusted Revenue

     28%         68.3%         19.1%   

Adjusted Diluted EPS

     42%         135.2%         56.8%   

Strategic/Operating/Compliance Priorities

     30%         107.4%         32.2%   

Total

     100%                  108.1%   

 

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Details behind the Company performance objectives, relative weighting, and actual results are summarized below from the 2015 Company Performance Scorecard:

 

     Objective   2015 Results   Weighting     Achievement
Level
    Contribution
(Weighting x
Achievement)
 
FINANCIAL OBJECTIVES         70.0%        108.5%        75.92%   
Adjusted Revenue Goal (1)   Meet or exceed revenue goals of $3.362B, adjusted for business development transactions and currency.   Achieved adjusted revenue from continuing operations of 97.9% of adjusted plan resulting in a payout level of 68.3% of target.     28.0%        68.3%        19.12%   
Adjusted Diluted EPS Goal (1) (2)   Meet or exceed adjusted diluted EPS goal of $4.37 adjusted for business development transactions, share repurchase activity and currency.   Achieved adjusted diluted EPS from continuing operations of 107.1% of adjusted plan resulting in a payout level of 135.2% of target.     42.0%        135.2%        56.80%   
STRATEGIC, OPERATING AND COMPLIANCE PRIORITIES         30.0%        107.4%        32.21%   
Drive organic growth through core businesses   Achieve overall company positive underlying growth versus 2014 and meet growth objectives for key pharmaceutical brands.   Achieved positive underlying revenue growth of 7% and exceeded share targets.     4.5%        66.7%        3.00%   
Execute value-creating deals   Announce 2-3 new transactions that meet all established deal criteria and meet Auxilium deal case revenue and EPS accretion objectives.   Transformed Endo with the completion of the Auxilium and Par acquisitions, Aspen asset transaction and VOLTAREN® GEL marketing agreement extension through 2023, while selling the AMS Men’s Health business. Underachieved Auxilium 2015 revenue goals, but establishing positive momentum for 2016.     4.5%        75.0%        3.38%   
Increase value of R&D pipeline   Gain approval for BELBUCA®, advance Generics pipeline progress XIAFLEX® development program in support of potential new indications.   Gained BELBUCA® approval and meet Generics ANDA and new product launch goals consistent with Par portfolio reprioritization, while finalizing selection of XIAFLEX® development plans.     4.5%        116.7%        5.25%   
Establish robust international pharmaceuticals segment   Expand International Pharmaceuticals through the successful integration and optimization of Litha in South Africa and establish a Latin American commercial platform though Somar to generate double digit future revenue growth.   Expanded International Pharmaceuticals further diversifying the Company’s financial profile by repositioning Litha as a pharmaceutical growth business by divesting non-core businesses and completing the acquisition of 60 branded and generic products, while exceeding Somar’s revenue and profitability goals.     3.0%        131.3%        3.94%   
Enhance continued focus on quality, compliance and risk management   Meet all FDA and DEA compliance requirements, appropriately and effectively manage liabilities, and effectively integrate Auxilium’s commercial platform into Endo’s corporate integrity agreement (CIA).   Achieved successful inspections, effectively managed product liabilities, while completed CIA integration objectives for acquired companies.     4.5%        110.0%        4.95%   
Expand value of established corporate structure   Manage the Company’s effective tax rate (ETR) to 19% or below and continue to enhance Irish entity’s infrastructure to gain further value.   Achieved an ETR below the 2015 guidance range of 9% to 10% positioning the Company for sustainable operating efficiency and an ETR in 2016 of approximately 9% to 11%.     3.0%        150.0%        4.50%   
Maintain lean operating model principles   Achieve 2015 exit annual run rate synergies of $100MM for Auxilium, and achieve underlying OpEx of 26.2% of sales.   Exceeded Auxilium synergy targets with $120MM achieved, with Restated Actual OpEx of 21.7% as a percent of sales vs. Restated Budget of 22%.     3.0%        127.5%        3.83%   
Reinforce high performance culture/commitment to Endo’s Vision and Key Values   Introduce Endo’s Vision, Key Values and Leadership Behaviors into all acquired companies and embed into core people management processes.   Launched new Vision and Key Values in furthering Endo’s culture of compliance and performance, competed Organizational Health Index employee and revised people management processes in support of a lean operating culture.     1.5%        125.0%        1.88%   
Engage, retain and attract the best talent aligned with our strategy   Enhance talent development and succession planning initiatives to further strengthen leadership pipeline, and further align incentive structure with longer-term value creation goals.   Developed succession plan for all critical leadership positions. Revised stock compensation allocation and updated Performance Share Plan design further embedding performance-based equity as greater percentage of total compensation.     1.5%        100.0%        1.50%   

 

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(1)

Adjustments to revenue and adjusted diluted EPS include: a) adjustments for unbudgeted acquisitions during the performance period to include deal model base case revenue and EPS commitments in the Company’s performance targets; b) adjustments for unplanned material changes in share count during the performance period; and c) adjustments to neutralize foreign exchange impact versus budget during the performance period

(2)

Please see page 33 for reconciliation of adjusted diluted EPS to its mostly directly comparable GAAP financial measure—diluted EPS

The Compensation Committee also considered each named executive officer’s contributions and awarded the NEOs the 2015 annual cash IC bonus amounts set forth in the “Individual Compensation Determination” section. See also below under the heading “Post-Termination Benefits” regarding how each named executive officer with an employment agreement is entitled to cash incentive compensation as a percentage of salary under certain circumstances.

Equity-Based Long-term Incentive Compensation

Purpose. The LTI program provides an annual award (and, under certain circumstances, a periodic award) that is performance-based. The objective of the program is to align compensation for NEOs over a multi-year period directly with the interests of shareholders of the Company by motivating and rewarding creation and preservation of long-term shareholder value. The level of LTI compensation is determined based on an evaluation of competitive factors in conjunction with total compensation provided to NEOs and the goals of the compensation program described above. Currently, LTI awards are equity-based providing for the awarding of PSUs, RSUs, and stock options. The timing of our equity grants, including stock options, is not coordinated in a manner that intentionally benefits our executive officers or is timed to coincide with the release of material non-public information.

The Company believes that a combination of PSUs, RSUs, and stock options closely equates the value of the benefit received by the recipient to the accounting expense of the benefit to the Company. The Company also believes that the resulting blend of PSUs, RSUs, and stock options is supported by the pattern of equity-based awards that prevails in the Pay Comparator Companies and in the external market generally.

Senior management’s targeted mix has been calibrated to assign a higher portion of performance-based equity compensation, specifically through the expanded use of PSUs. For Mr. De Silva, PSUs account for 75% of his overall LTI value, with the remaining portion awarded in the form of stock options. For senior leaders other than Mr. De Silva, 75% of the annual equity award is valued based upon share price growth through the granting of PSUs and stock options. This practice is intentionally designed to motivate senior management to increase the creation and preservation of shareholder value. The equity mix for senior management other than Mr. De Silva is reflected in the graph below.

 

LOGO

In determining the annual LTI grants for the NEOs, the Compensation Committee considered market data on total compensation packages, the value of long-term incentive grants at the Pay Comparator Companies, total shareholder return, share usage and shareholder dilution and, except in the case of the award to the President and Chief Executive Officer, the recommendations of the President and Chief Executive Officer.

 

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The equity-based LTI compensation target for each named executive officer related to 2015, to be paid in early 2016, is reflected in the graph below.

 

LOGO

Note: LTI for Rajiv De Silva determined at the

discretion of the Compensation Committee.

Further, performance is considered based on a collective group of factors focused on financial, operational and strategic results, which drives the Company’s future success as a leading global specialty pharmaceutical company that improves lives while creating value. At the end of the performance year, each named executive officer’s performance is assessed and then factored into the awarding of equity-based compensation. Grant levels are determined based on overall performance relative, but not limited to the following factors adopted by the Committee for all applicable NEO LTI assessments:

 

Development of a long-term vision for the Company and execution of the overall business strategy    Formation and implementation of value-creating capital structure initiatives
Achievement of Company operating objectives and overall financial performance    Progress in the development and expansion of the Company’s product portfolio and pipeline
Success in forging the Company for long-term sustainable revenue and profitability growth    Advancement of the Company’s performance-oriented culture and talent pipeline
Achievement of quality and compliance objectives    Success in engaging with key stakeholders and investors
Success relative to deal model financial commitments and integration objectives    Relative shareholder value creation and preservation

Based upon the achievement of Company goals and individual objectives, our Chief Executive Officer recommends 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. De Silva’s employment agreement did not prescribe a specific LTI target but instead provided that his LTI compensation would 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. De Silva’s employment 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). The Compensation Committee may use negative discretion to take into account factors outside of the pre-established performance objectives to reflect extraordinary business circumstances. For example, because of overall 2012 corporate results and Company TSR, the long-term equity grant for the NEOs was reduced to 75% of the target award levels. These actions taken by Endo’s Compensation Committee demonstrated the Compensation Committee use of negative discretion under appropriate circumstances and the Company’s commitment to its pay-for-performance philosophy. Further, pursuant to each of our NEOs’ employment agreements, target LTI as a percentage of annual base salary may subsequently be increased at the discretion of the Compensation Committee. Based on Mr. Upadhyay’s strong performance, and an analysis of the competitiveness of his pay related to the Company’s Pay Comparator Companies conducted by the Compensation Committee’s consultant, Hay Group, Mr. Upadhyay’s 2015 target LTI was increased to 300% of annual base salary with a maximum award of 150% of target. The Committee did not implement any other LTI target changes for the Company’s NEOs for the 2015 performance year.

Performance Share Units. PSU awards are granted annually, with each award covering a 3-year performance period. Through this program, executives are eligible to earn a specified target number of shares of the Company at the end of the 3-year performance period. The actual share award is released at the end of the 3-year plan period depending on how well the Company performed against the targets set at the beginning of the 3-year program.

In 2015, the Company continued to grant PSU awards based exclusively on annual share price compounded annual growth rate (CAGR) over a 3-year performance period. These awards were granted to eligible Vice President-level and above execu-

 

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tives to strengthen the focus on shareholder value creations and preservation. 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 300% of the target award amount based upon achievement of pre-determined absolute stock price performance goals based on the 3-year CAGR targets. Payouts with respect to these PSUs, if any, will be made in ordinary shares of the Company following the close of the 3-year performance cycle. In determining the extent to which the pre-set performance measures are met for a given period, the Compensation Committee may exercise 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.

At the time this approach was under initial consideration, Endo analyzed median annualized TSR performance levels among companies in the S&P 1500 Healthcare Index, which served as the comparator group used to assess relative TSR performance prior to 2014. TSR levels were analyzed over multiple 3-year performance periods since 2008, and the results indicated that median annualized TSR levels were just over 10% on average, with a median low of 2.1% and median high of 18.7%. Based on this, the Compensation Committee designed the program to provide for forfeiture of the entire PSU award if Endo’s CAGR over the 3 year performance level was below 10% (that is, below median levels for the comparator group analyzed).

 

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In 2015, all executive leadership team members with the exception of Mr. De Silva remained eligible to participate in the share matching program offered from November 12, 2014 through December 31, 2015 (subject to restricted trading periods). The program allows participants to make a direct investment in Endo ordinary stock during a pre-defined period, which the Company would immediately match with a performance share unit for each share purchased up to one times the employee’s base salary. The matching PSUs would vest on the third anniversary of the date issued to the employee if the CAGR of the Company’s ordinary shares is at least 10% over the 3-year period. The program can be offered on a periodic basis to all eligible executive leadership team members, with subsequent offerings subject to Compensation Committee approval.

In February 2016, the Compensation Committee approved modifications to the PSU program, effective with the 2016 grants to eligible Vice President-level and above positions, including the Company’s NEOs. In an effort to better align the program with the program’s objectives, including alignment with competitive practices and the Company’s focus on increasing shareholder value, the Committee approved the implementation of a single performance measure based on relative 3-year TSR performance with maximum award levels also dependent upon Endo achieving 20% annual share price CAGR over the 3-year performance period. 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 300% of the target award amount dependent upon achievement of the pre-determined TSR performance goals.

Holders of PSUs will be entitled to receive a number of shares of the Company equal to a multiple of the award based on the Company’s TSR relative to the TSR of a custom index of companies. The custom index utilized for the 2016 grant is initially comprised of a statistically meaningful group of forty pharmaceutical companies, which include companies in the New York Stock Exchange ARCA Pharmaceutical Index, Endo’s Pay Comparator Companies, and other specialty pharmaceutical companies. For purposes of determining the final relative TSR performance measurement, each company in the custom index will be included only if they are publicly-traded at both the beginning and end of the performance period. Under the new design, the PSU awards will not vest unless the 3-year TSR results reach the 40th percentile minimum threshold, while the maximum attainment multiple of 3x can only be achieved if the Company’s percentile rankings is at or above the 90th percentile, and the annual share price CAGR is at least 20% over the performance period. Further, a maximum of 1x of the award will vest if the Company’s Total Shareholder Return for the performance period is negative with no payout if results are below the 40th percentile. Award levels based on positive TSR results will be interpolated between the 1x and 2x payout multiples.

The performance period for the 2016 annual awards began on February 23, 2016 and ends on February 23, 2019, and will be assessed at the end of the performance cycle based on a beginning Per Share Price of $53.81. Payouts with respect to these PSUs, if any, will be made in ordinary shares of the Company once the performance attainment levels have been approved by the Compensation Committee, following the close of the 3-year performance cycle and are therefore not eligible for earlier acceleration of vesting if target TSR attainment levels are achieved prior to the end of the 3-year performance cycle. In determining the extent to which the pre-set performance measures are met for a given period, the Compensation Committee may exercise 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. The determination of TSR, and CAGR performance, if applicable, will be made at the sole discretion of the Compensation Committee. The Committee also has discretion to accelerate the vesting of all or a portion of the Participant’s PSU based upon the overall performance of the

 

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Company and/or the Participant or based upon any change in business conditions, provided that the exercise of such discretion would not cause a PSU that would otherwise be deductible as “performance-based” compensation within the meaning of Section 162(m) of the Internal Revenue Code to become non-deductible.

“Per Share Price” means the average of the closing prices of the Company’s ordinary shares for the applicable company during the thirty consecutive trading days ending on the day prior to the applicable measurement date.

“Total Shareholder Return” means the appreciation of the Per Share Price during the Performance Period, plus any dividends paid on the applicable Company’s ordinary shares during the Performance Period. The determination of the TSR attainment levels will be made by the Compensation Committee following an independent third-party confirmation of the results.

“CAGR” means the compounded annual growth rate of the Company’s ordinary shares, which will be determined based on the appreciation of the Per Share Price during the Performance Period, plus any dividends paid on the shares during the Performance Period. The determination of the 3-Year CAGR attainment levels will be made by the Compensation Committee following an independent third-party confirmation of the results.

 

 

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Restricted Stock Units. In addition to the PSUs described above, our NEOs (other than Mr. De Silva) also are granted time-based RSUs, which are the second element of our equity-based LTI compensation package. RSUs are valued based on the closing price of our ordinary shares on the NASDAQ on the date of grant, and each RSU represents the right to receive one ordinary share of the Company as of the date of vesting. RSUs granted to the NEOs generally vest ratably over four years.

Stock Options. Stock options represent the third element of our equity-based LTI compensation package, and are designed to reward NEOs only if the share price increases. The LTI program calls for stock options to be granted with exercise prices of not less than the closing price of our shares as quoted on the NASDAQ on the date of grant and generally to vest ratably over four years. The Compensation Committee will not reduce the exercise price of stock options (except in connection with adjustments to reflect recapitalizations, share or extraordinary dividends, share splits, mergers, spin-offs and similar events permitted by the relevant plan) without shareholder approval. Stock options grants to NEOs have been awarded with a term of seven years, with the exception of Mr. De Silva’s stock option awards and stock options issued under the 2015 Stock Incentive Plan, which have 10 year terms.

Vesting due to retirement age. On the first day of the year in which an NEO reaches retirement age, which is considered age 60 with five years of service or age 55 with ten years of service, PSUs, RSUs and stock options are eligible for continued vesting in accordance with the original vesting schedule. However, awards eligible for continued vesting as a result of reaching retirement age are not settled until after the end of the performance period, if applicable.

Considerations. The Company believes that the most effective means to encourage long-term performance by our NEOs is to create an ownership culture. This philosophy is implemented through the granting of the equity-based awards described above. The LTI program described above is designed so that Company leaders hold a competitive stake in the Company’s financial future. The LTI program provides a future reward structure so that employees who have an impact on the Company’s performance share in the results of that impact.

The LTI pool is established annually based on the Company’s achievement of goals and objectives, and can vary significantly from year to year. The share pool is also managed in a manner that focuses on optimizing share utilization, while remaining

 

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aligned with competitive eligibility and grant practices. Key dilution metrics such as burn rate and overhang are regularly evaluated against external benchmarks, but also considered in the context of the Company’s significant growth in recent years.

 

 

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The Company generally establishes non-NEO eligibility criteria to align Company and industry practices, with participation in the LTI program based on individual performance. LTI awards remain an important component of the Company’s compensation philosophy, and are allocated most heavily to:

  ¡  

Reward consistently high performing individuals who we expect will increase the future value of the Company;

  ¡  

Reward individuals at various levels who have high impact relative to the expectations of their role; and

  ¡  

Retain eligible individuals who have skills critical to the long-term success of the Company and who exemplify our core value behavior.

The Endo International plc Amended and Restated Employee Stock Purchase Plan (ESPP) was introduced in 2012 to reinforce the Company’s emphasis on building an ownership culture for all eligible employees regardless of whether or not they participate in the LTI program.

Timing of Grants. Annual grants of PSUs, RSUs, and stock options to our NEOs are typically made at a regularly scheduled meeting of the Compensation Committee held during the first quarter of each year. The Company may also make occasional grants during the year to employees of the Company. These grants are typically associated with promotions and hiring, and are typically made shortly following the effective date of the promotion or date of hire.

2015 Decisions Regarding Equity-Based LTI Program. In 2015, the Compensation Committee awarded LTI compensation for NEOs pursuant to the program described above resulting in the awards of PSUs, RSUs, and stock options identified in the Summary Compensation Table and the 2015 Grants of Plan-Based Awards Table. For grants awarded in 2016 based on 2015 performance, the Compensation Committee reviewed the Company’s achievements as well as each named executive officer’s contributions and awarded the NEOs the LTI amounts set forth in the “Individual Compensation Determination” section.

Periodic Review. The Compensation Committee reviews both the annual IC program and the LTI program annually to confirm that their key elements continue to meet the objectives described above.

Ownership Guidelines for Executive and Senior Management. The current Ownership Guidelines for executive and senior management are as follows:

 

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Executive and senior management are expected to achieve the Ownership Guidelines within five years of joining the Company, or, if in the case of individuals serving in this capacity at the time the Ownership Guidelines were adopted, within five years of the date of adoption of the Ownership Guidelines. Executive and senior management are also expected to continuously own sufficient shares to meet the Ownership Guidelines once attained. Members of executive and senior management who subsequently get promoted to a higher level will have five years from the date of promotion to achieve their new ownership target. All individuals subject to the Ownership Guidelines are in compliance with the established guidelines.

Individual Compensation Determination

Under our compensation structure, the mix of base salary, cash IC and equity-based LTI compensation varies depending on each named executive officer’s level. Annual compensation determinations by the Compensation Committee are based on factors including the Company’s performance, individual performance, and the competitiveness of each NEO’s pay as reported by the Compensation Committee’s consultant, Hay Group. The following summarizes the compensation decisions made in 2016 by the Compensation Committee for the named executive officers based on 2015 performance:

 

Name   Base Salary as
of
December 31,
2015
    2015 IC Target     2015 IC Actual     2015 Long-Term
Equity Incentive
Compensation
Target
    2015 Long-
Term Equity
Incentive
Compensation
Actual (1) (2)
 

Rajiv De Silva

  $           1,155,000      $           1,443,750      $           1,687,110       
 
Committee
Discretion
  
  
  $         12,516,354   

Suketu Upadhyay

  $ 630,000      $ 346,500      $ 486,936      $           1,890,000      $ 3,310,505   

Paul V. Campanelli

  $ 950,000      $ 760,000      $ 1,064,000      $ 2,375,000      $ 2,773,310   

Matthew J. Maletta

  $ 475,000      $ 261,250      $ 338,894      $ 950,000      $ 1,331,238   

Susan Hall

  $ 515,000      $ 283,250      $ 398,051      $ 1,030,000      $ 1,563,569   

 

(1)

The amounts shown in this column include the fair value under ASC 718 of the 2015 annual option awards on the date of grant determined using the Black-Scholes or Monte-Carlo variant valuation model, as appropriate. Additionally, amounts reflect the grant date fair value of the annual PSUs which include both a performance and market-based variable as defined within ASC 718. Although the fair value of executive award grants listed above has been determined in accordance with the applicable accounting standards, values may not be indicative of the fair value observed in a willing buyer / willing seller market transaction. Award levels established at the time of grant are based on the grant expected value which is derived from Endo’s closing price at the time of grant.

(2)

Special off-cycle PSU awards for Mr. Upadhyay, Mr. Campanelli, Mr. Maletta and Dr. Hall (4,450, 2,100, 500 and 1,000, respectively) are not included in the figures noted in this table since the awards are outside of the annual grant process. These represent the Matched PSUs granted under the share matching program on November 11, 2015. Subject to the terms and conditions approved by the Compensation Committee in February 2014, the Matched PSUs allow for a performance-based award, subject to 10% CAGR performance criteria over the three year performance period, to be granted in connection with the aforementioned NEO’s personal investments in Endo Shares. The share matching program was approved as a means of allowing Endo’s executive leadership team members the opportunity to quickly establish a significant equity stake in Endo, which is tied to performance-based vesting and holding conditions designed to increase shareholder value. Subject to the terms and conditions outlined in Mr. Campanelli’s employment agreement, Mr. Campanelli also received 72,632 Matched PSUs outside of the share matching program, which allow for a performance-based award in connection with Mr. Campanelli’s personal investment in Endo Shares. The Matched PSUs were approved by the Compensation Committee and Board as a means of allowing Mr. Campanelli the opportunity to quickly establish a significant equity stake in Endo, which is tied to performance-based vesting and holding conditions designed to increase shareholder value. Based on Mr. Maletta’s contributions in 2015 and the critical nature of his position to the implementation of the Company’s strategy, the Compensation Committee approved a special equity grant under the Company’s 2015 Stock Incentive Plan. The grant was comprised of 4,811 PSUs, 4,811 RSUs, and 17,394 stock options that follow the same general structure used for the 2015 annual grants, and is designed to increase the level of focus placed on increasing shareholder value. Since the awards for Mr. Campanelli and Mr. Maletta are outside of the annual grant process, both are not included in the figures noted in the above table.

 

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Each named executive officer’s target percentage and actual number of PSUs, RSUs, and stock options granted in 2016 based on 2015 performance were as follows:

 

Name   LTI Target %
of Base
Salary
    PSUs
Actually
Granted
    RSUs
Actually
Granted
    Options
Actually
Granted
 

Rajiv De Silva

   
 
Committee
Discretion
  
  
    149,342               167,897   

Suketu P. Upadhyay

                  300%                    28,225                    14,112                    47,599   

Paul V. Campanelli

    250%        23,645        11,822        39,875   

Matthew J. Maletta

    200%        11,350        5,675        19,140   

Susan Hall

    200%        13,331        6,665        22,481   

 

 

Rajiv De Silva

President and Chief Executive Officer

 

 

To provide further assurance of independence, the information used to determine the compensation recommendation for the President and Chief Executive Officer is developed by Hay Group. Hay Group prepares analyses showing competitive Chief Executive Officer compensation among the Pay Comparator Companies for the individual elements of compensation and total direct compensation. The consultant develops a range of recommendations, based on various Company and individual performance assumptions, for any change in the President and Chief Executive Officer’s base salary, annual cash incentive, equity grant value, and equity mix. The recommendations take into account the competitive Pay Comparator Company pay analysis, expected future pay trends, and the position of the President and Chief Executive Officer in relation to other senior company executives and proposed pay actions for all key employees of the Company. The results of this analysis are shared with the Committee, during which time the Company’s performance, and the performance of the President and Chief Executive Officer are evaluated, and compensation decisions determined. The President and Chief Executive Officer has no prior knowledge of the recommendations, and only participates in the process during the stage when he reviews his evaluation of Company performance and his personal performance with the Committee. The President and Chief Executive Officer takes no part in the recommendations, Committee discussions, or decisions, other than what is described above.

 

The Committee’s assessment of Mr. De Silva’s performance is based on the successful development and implementation of Endo’s transformational strategy and the execution of a long-term sustainable growth plan for the Company. Further, Mr. De Silva’s performance is evaluated based upon the Company’s overall financial performance and the achievement of annual operating objectives. Specifically, the Committee strongly considered the specific Company financial and operating objectives as summarized in the Compensation Discussion & Analysis “Executive Summary” and further detailed within the “Performance-Based Annual Cash Incentive Compensation” section. Among several performance-based categories, the assessment included meeting and exceeding key financial metrics, the achievement of organic growth in the Company’s core businesses, the completion and integration of value-creating M&A transactions, the implementation of Endo’s corporate structure and lean operating model, augmenting the value of the Company’s pipeline and launch products, maximizing balance sheet flexibility and optimizing working capital, enhancing the Company’s focus on quality, compliance and risk, and developing a sustainable Endo culture that motivates and energizes the organization toward achieving the Company’s strategy while building leadership strength and depth.

 

Based on an analysis of the competitiveness of Mr. De Silva’s pay related to the Company’s Pay Comparator Companies conducted by Hay Group, Mr. De Silva’s annual base salary compensation remained unchanged at $1,155,000. The Compensation Committee also assessed Mr. De Silva’s achievement against the Company’s annual pre-established and formulaic objectives, while operating within structure of the Internal Revenue Code Section 162(m) compliant IC program which allows for a maximum bonus equal to 225% of the target bonus amount and the use of negative Committee discretion based on actual performance. Based on overall Company financial and operating performance against the Company’s objectives in 2015, the Committee awarded Mr. De Silva a 2015 performance-based cash bonus equal to approximately 116.9% of his target amount.

 

The following illustrates the mechanics underlying the annual cash incentive calculation for Mr. De Silva:

 

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Rajiv De Silva

President and Chief Executive Officer (continued)

 

 

Mr. De Silva entered into a new employment agreement with the Company on February 28, 2016, with a three-year term effective March 18, 2016. His agreement does not prescribe a specific LTI target, but instead provides for his LTI compensation to be determined at the sole discretion of the Compensation Committee based upon several performance-based criteria.

 

Mr. De Silva’s performance in 2015 was assessed by the Committee based on a collective group of factors focused on financial, operational and strategic results, which drives the Company’s future success as a leading global specialty pharmaceutical company that improves lives while creating value. Based on Hay Group’s analysis of competitive LTI levels, and in consideration of Mr. De Silva’s performance against the Company’s objectives, Mr. De Silva was granted an equity-based award with an expected value equal to approximately $10.0 million based on Endo’s closing price at the time of grant, which is highly consistent with median actual LTI levels awarded by Endo’s Pay Comparator Companies (see footnote (1) on page 41 for details regarding LTI valuations under ASC 718 for accounting and proxy reporting purposes). Mr. De Silva’s equity award was issued entirely in the form of performance-based equity consisting of 75% PSUs and 25% stock options, with any realizable value dependent upon the delivery of relative and absolute shareholder value. This grant was approved in recognition of Mr. De Silva’s overall performance relative, but not limited to, the following factors adopted by the Committee for all applicable NEO LTI assessments:

 

 

Development of a long-term vision for the Company and execution of the overall business strategy

   Formation and implementation of value-creating capital structure initiatives
 

Achievement of Company operating objectives and overall financial performance

   Progress in the development and expansion of the Company’s product portfolio and pipeline
 

Success in forging the Company for long-term sustainable revenue and profitability growth

   Advancement of the Company’s performance-oriented culture and talent pipeline
 

Achievement of quality and compliance objectives

   Success in engaging with key stakeholders and investors
 

Success relative to deal model financial commitments and integration objectives

   Relative shareholder value creation and preservation
 

 

Mr. De Silva’s equity-based award allows his total direct compensation levels and pay mix to be highly consistent with practices observed among CEOs of both Endo’s Pay Comparator Companies and ISS Peer Group. Endo’s pay structure supports the Company’s pay-for-performance compensation philosophy in that only 9% of Mr. De Silva’s total direct compensation is fixed while 91% is dependent upon performance.

 

 

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Suketu P. Upadhyay

Executive Vice President & Chief Financial Officer

 

 

Mr. Upadhyay serves as Chief Financial Officer and also oversees investor relations, information technology and government affairs. Mr. Upadhyay has broad-based leadership skills, financial expertise and business acumen related to strategic and financial matters. Under Mr. Upadhyay’s financial leadership, the Company achieved strong financial performance in 2015. The Company attained adjusted revenue growth of greater than 37% from continuing operations as a result of underlying growth in core business combined with the addition of new revenue sources from acquisitions. Total adjusted diluted EPS for 2015 was $4.66, exceeding the top end of the financial guidance range. Net income exceeded expectations through prudent management of expenses and improvements in the Company’s effective tax rate. Mr. Upadhyay also played a key leadership role in Endo’s business development activities in 2015, which included the acquisition of Auxilium Pharmaceuticals, Inc., Litha Healthcare Group and Par Pharmaceutical Holdings, as well as the divestiture of the AMS Men’s Health business. Based on Hay Group’s analysis of the competitiveness of Mr. Upadhyay’s pay related to Endo’s Pay Comparator Companies, and Mr. Upadhyay’s operational and strategic performance since joining Endo in 2013, the Committee approved an increase to Mr. Upadhyay’s 2015 equity-based long-term incentive target from 250% to 300%. In recognition of Mr. Upadhyay’s 2015 performance, the Committee approved a merit increase to base salary of 4% effective March 1, 2016. Based on individual performance and Company performance against 2015 scorecard objectives as noted on page 34, Mr. Upadhyay was awarded an annual performance-based bonus equal to approximately 141% of his annual cash IC target. Based on the performance factors noted on page 37, Mr. Upadhyay was also awarded an equity-based award equal to 150% of his LTI target.

 

 

 

Paul V. Campanelli

President, Par Pharmaceutical

 

 

Mr. Campanelli joined Endo on September 28, 2015 as President, Par Pharmaceutical following the Company’s acquisition of Par Pharmaceutical Companies, Inc. Prior to joining Endo, Mr. Campanelli served as Chief Executive Officer of Par Pharmaceutical, where, he led impressive growth through Par’s industry-leading product development achievements and targeted acquisition strategy. Mr. Campanelli is now responsible for leading the Company’s integrated Generics business, which offers an extensive range of dosage forms and delivery systems. The Company’s Par Pharmaceutical business, which is the combination of legacy Par and the Company’s Qualitest business, is one of the industry’s fastest growing generics companies and the fifth largest U.S. generics business based on sales revenue. In 2015, Mr. Campanelli was instrumental in the completion of the Company’s acquisition of Par and the achievement of a successful integration of the legacy Par and Qualitest organizations. Based on an analysis of the competitiveness of Mr. Campanelli’s pay related to the Company’s Pay Comparator Companies conducted by the Hay Group, Mr. Campanelli’s annual base salary compensation remained unchanged at $950,000. In recognition of Mr. Campanelli’s leadership and contributions in 2015, the Committee awarded an annual performance-based bonus equal to approximately 140% of his current annual cash IC target, consistent with Par’s 2015 annual incentive plan. Based on the performance factors noted on page 37, Mr. Campanelli was also awarded an equity-based award equal to 100% of his LTI target.

 

 

 

Matthew J. Maletta

Executive Vice President, Chief Legal Officer

 

 

Matthew J. Maletta serves as the Company’s Executive Vice President, Chief Legal Officer since May 4, 2015. Mr. Maletta brings nearly two decades of legal experience and organizational leadership in the specialty pharmaceutical industry and with private law firms, including extensive experience in M&A, corporate, securities, finance, commercial and employment law. Since his arrival, Mr. Maletta has played a key leadership role in supporting the Company’s business development strategy which included the acquisition of Par Pharmaceutical Holdings, Inc. and the sale of the AMS Men’s Health business. Mr. Maletta has also led the Company’s product liability efforts, while providing advice on significant legal and business matters. As a result of Mr. Maletta’s performance and contributions in 2015, the Committee approved a merit increase to base salary of 7.4% effective March 1, 2016. Based on individual performance and Company performance against 2015 scorecard objectives as noted on page 34, Mr. Maletta was awarded an annual performance-based bonus equal to approximately 130% of his annual cash IC target. Based on the performance factors noted on page 37, Mr. Maletta was also awarded an equity-based award equal to 120% of his LTI target.

 

 

 

Susan Hall

Executive Vice President, Chief Scientific Officer and Global Head of Research & Development and Quality

 

 

Susan Hall, Ph.D. serves as Endo’s Executive Vice President and Chief Scientific Officer with responsibility for global Branded Pharmaceutical Research & Development and enterprise-wide Quality Assurance. Under Dr. Hall’s leadership, the Company has made substantial progress in expanding the Branded Pharmaceutical product pipeline through a financially prudent de-risked approach focused on later stage and inherently lower risk high-value programs. In 2015, Dr. Hall was instrumental in securing approval for BELBUCA™, which is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. Additionally, Dr. Hall led the FDA approval of a XIAFLEX® label update for the treatment of adult Dupuytren’s contracture for patients with a palpable cord, while selecting and initiating studies for new XIAFLEX® indications. Dr. Hall also made significant contributions in the life-cycle management of key Company’s assets important to patient care, including the potential label expansion for OPANA® ER to include the Company’s abuse deterrent formulation technology. In recognition of Dr. Hall’s performance and contributions in 2015, the Committee approved a base salary merit increase of 6.8% effective March 1, 2016. Based on individual performance and Company performance against 2015 scorecard objectives as noted on page 34, Dr. Hall was awarded an annual performance-based bonus equal to approximately 141% of her annual cash IC target. Based on the performance factors noted on page 37, Dr. Hall was also awarded an equity-based award equal to 130% of her LTI target.

 

 

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Additional Compensation Components

The Company’s current practice is to limit use of perquisites. In 2015, other than as described below, the only perquisites provided to the NEOs were financial planning services, use of a Company car or car services and term life insurance.

Retirement Benefits

The Company currently offers two executive retirement programs: the 401(k) Restoration Plan and the Executive Deferred Compensation Plan, each of which is described below. Both plans were effective January 1, 2008, and were amended and restated in 2014.

401(k) Restoration Plan. The purpose of the 401(k) Restoration Plan is to provide eligible employees with the opportunity to defer a portion of their compensation on a tax-favored basis in parity with the tax benefit provided under the qualified 401(k) plan. The 401(k) Restoration Plan allows eligible employees whose compensation exceeds the Internal Revenue Code Section 401(a)(17) amount (or other criteria set by the Compensation Committee), including NEOs, to defer eligible pay after such individual’s compensation has exceeded the earnings maximum in the Company’s existing qualified 401(k) plan. The Company does not fund employer matching contributions in the 401(k) Restoration Plan.

The amount in any individual’s 401(k) Restoration Plan account will be paid to such individual at termination of employment or following the elected specified payment date. Actual 401(k) Restoration Plan participation will begin when an executive’s total cash compensation exceeds the Internal Revenue Code earnings limit for the qualified 401(k) ($265,000 for 2016). Individuals who elect to defer their eligible pay under the 401(k) Restoration Plan will defer federal and state (to the extent allowed by state law) taxes until the account is paid to the individual.

Executive Deferred Compensation Plan. The Executive Deferred Compensation Plan permits executives to elect to defer up to 100% of the portion of the following year’s LTI compensation that is in the form of RSUs.

Deferral of the RSUs defers federal and state (as allowed under state laws) taxes on the compensation when the RSUs vest. The compensation is deferred until the deferred RSUs are settled in shares. The RSUs may be deferred to a specified payment date on which the elected disbursement(s) under the participant’s account will commence. The value of the compensation an executive receives upon the share delivery is based on the value of the Company’s shares on the date the deferral is delivered to the executive, and the executive will be responsible for the federal and state taxes at that time.

The Executive Deferred Compensation Plan also allows an executive to defer up to 50% of his or her annual cash IC award. When an executive makes his or her irrevocable election to defer cash IC, he or she also elects a specified payment date in which the elected disbursement(s) under the participant’s account will commence.

Post-Termination Benefits

Employment and Change in Control Agreements; Severance Agreements. The Company generally enters into a written employment agreement with each of its NEOs. The purpose of these agreements is to aid recruitment and retention and to reinforce an ongoing commitment to shareholder value creation and preservation.

On February 28, 2016, the Company entered into a new executive employment agreement with Mr. De Silva, which is effective March 18, 2016 and has a term of three years. Mr. De Silva’s new employment agreement replaced his previous agreement which was scheduled to expire on March 18, 2016.

Each Employment Agreement sets forth the annual salary of the respective named executive officer, which is, in each case, subject to annual reviews, at the discretion of the Compensation Committee. Each named executive officer will be paid cash IC in an amount equal to a set percentage of his or her annual salary for each year (or such lesser or greater amount for such year) as is recommended and approved by the Compensation Committee) if the Company achieves certain performance targets set by the Compensation Committee for such year. Each named executive officer is eligible to earn as additional compensation for the services to be rendered pursuant to his or her employment agreement, if applicable, equity-based LTI in an amount approved by the Compensation Committee.

If any of the named executive officers terminates his or her current employment agreement for Good Reason or if the Company terminates him or her Without Cause, the Company will (i) pay a lump sum equal to two times his or her then current salary and target IC for the year in which the termination is effective and (ii) continue to provide such named executive officer with medical and life insurance benefits for twenty-four (24) months. Pursuant to his new agreement, if Mr. De Silva is terminated other than for Cause or quits for Good Reason within twenty-four (24) months of a Change In Control, then he will be entitled to receive (x) a lump sum payment equal to three times the sum of (1) his then current salary plus (2) his target bonus, plus (y) medical and life insurance benefits for a period equal to three (3) years after the date on which the termination is effective. Each named executive officer’s employment agreement contains a non-compete provision.

Camille I. Farhat

On August 4, 2015, the Company announced that Mr. Farhat would be transitioning from his role as President, American Medical Systems following the sale of the American Medical Systems’ Men’s and Prostate Health businesses to Boston Scientific.

 

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Following the sale, Mr. Farhat served as a Special Advisor to Mr. De Silva through his separation date of September 7, 2015. In connection with his pending transition, the Company entered into a Retention Agreement with Mr. Farhat which ended on June 30, 2015.

Other Compensation Practices and Policies

Tax Deductibility of Compensation

Section 162(m) of the Internal Revenue Code precludes a public corporation from taking a tax deduction for certain compensation in excess of $1.0 million in any one year paid to its Chief Executive Officer or any of its three other highest-paid executive officers (not including the Company’s Chief Financial Officer), unless certain specific and detailed criteria are satisfied. However, certain qualifying “performance-based” compensation (i.e., compensation paid under a plan administered by a committee of outside directors, based on achieving objective performance goals, the material terms of which were approved by shareholders, such as our 2015 Stock Incentive Plan) is not subject to the $1.0 million deduction limit. While the Compensation Committee considers the applicable rules regarding deductibility when making awards, it reserves the right to make nondeductible payments when it deems appropriate.

Company Policy on Parachute Payments

On May 5, 2009, the Company’s Board of Directors adopted a policy that provides that the Company will not enter into any future employment agreements that include “golden parachute” excise tax gross-ups with respect to payments contingent upon a change in control. Accordingly, the employment agreement of each of Mr. De Silva, Mr. Upadhyay, Mr. Campanelli, Mr. Maletta and Dr. Hall does not include excise tax gross-ups with respect to payments contingent upon a change in control. An excess parachute payment is generally a change in control payment in excess of one times the average of the officer’s taxable W-2 income for the five years prior to the change in control (base amount), and generally only results if the change in control payment exceeds 2.99 times the base amount. Excess parachute payments, including any excise tax gross-up payments, are non-deductible to the Company under Section 280G of the Internal Revenue Code. The Company no longer has any employment agreements with Change in Control excise tax gross up provisions.

Code Section 4985 Excise Tax

In connection with the Company’s Paladin acquisition, Section 4985 of the Internal Revenue Code imposed a 15% excise tax on the value of certain stock compensation held by a “covered individual,” who is or was an executive officer or director and subject to the reporting requirements of Section 16(a) of the Exchange Act at any time during the six months before and six months after the closing of the merger. This excise tax applied to any outstanding (1) nonqualified stock options, whether vested or unvested, (2) restricted stock awards that remain subject to forfeiture, (3) unvested restricted stock unit awards, (4) vested but deferred shares and (5) unvested performance restricted stock unit awards, held by the covered individuals during this twelve month period.

Background. Prior to the approval of the Paladin transaction, the Endo Board of Directors considered the impact of the potential Section 4985 excise tax on the covered individuals, determining that the imposition of the tax on the covered individuals, when the vesting of outstanding equity awards subject to the excise tax is not being accelerated and covered individuals are receiving no additional benefit in connection with the transaction, would result in the affected individuals being deprived of a substantial portion of the value of their equity awards. The Endo Board of Directors concluded that it would not be appropriate to permit a significant burden arising from a transaction expected to bring significant strategic and financial benefits to Endo and its shareholders, including operational and tax synergies, to be imposed on the individuals most responsible for consummating the transaction and promoting the success of the combined company.

In addition, the Endo Board of Directors assessed and compared the relative costs and benefits of two approaches for mitigating the possible impact of the Section 4985 excise tax: (1) reimbursing the covered individuals for the Section 4985 excise tax that would be payable by them as a result of the transaction (and any resulting income), and (2) accelerating the vesting of and/or canceling these officers’ and directors’ equity awards. In weighing these alternatives, and deciding in favor of reimbursing the covered individuals for the Section 4985 excise tax and the resulting income, as opposed to accelerating the vesting and delivery of outstanding equity awards, the Endo Board of Directors considered the uncertainty of whether the excise tax will apply and the high cost to Endo and its shareholders of accelerating the awards given, the Endo Board of Directors determined that accelerating the vesting and payment of outstanding equity awards to avoid the excise tax could result in Endo incurring an unnecessary compensation expense following the merger to make the new grants that would be necessary to incentivize and retain key individuals and align the interests of the executive officers and directors with shareholders following the merger. Conversely, if the covered individuals had been reimbursed for the excise tax, Endo would only incur additional expense if and when it is determined that the excise tax is applicable.

In addition, the Endo Board of Directors considered the strong desire to continue to align the interests of executive officers and directors with stockholder interests through substantial and meaningful officer and director equity ownership. Several of Endo’s executive officers were newly employed and therefore have a significant number of unvested equity awards. Endo’s Board of Directors determined that the effect of accelerating the vesting of, or canceling, such awards would be to lose sig-

 

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nificant retention value during a crucial period. Furthermore, the Endo Board of Directors considered the strong preference communicated by Endo’s investors that Endo’s executive officers hold long-term performance-based compensation, which represents a large percentage of the unvested awards outstanding, and that accelerating the vesting of these performance-based awards could result in unearned compensation being paid to the executives.

Therefore, after consideration, prior to the approval of the Paladin transaction, the Endo Compensation Committee concluded that, if the excise tax becomes applicable, Endo would provide the covered individuals with a payment with respect to the excise tax, so that, on a net after-tax basis, they would be in the same position as if no such excise tax had been applied. In addition, the covered individuals will retain the obligation to pay income and other taxes on all of their individual equity awards when due. The outstanding equity awards held by the covered individuals will continue to reflect the same terms, including vesting schedules, at the combined entity.

Conclusion. This specific arrangement was considered by our shareholders at the February 26, 2014 Special Meeting of Shareholders related to the Paladin acquisition. At that special meeting, approximately 99% of voting shareholders approved in an advisory vote the payments to our covered individuals with respect to the potential excise tax.

Endo has since determined that the excise tax was applicable. As a result, the appropriate amounts were determined and paid to the Company’s covered individuals in December 2014. Although the payments related to the excise tax appear as “All Other Compensation” in the Summary Compensation Table and the Compensation of Non-Employee Directors table, the payment of these non-recurring items resulted in no unique benefit to the directors and NEOs and were intended only to place them in the same position as other equity compensation holders after the Paladin acquisition.

Recovery of Compensation

In 2009, the Compensation Committee adopted a compensation recovery policy relating to repayment of cash incentive awards by an executive in the event of a restatement of the Company’s financial results.

Specifically, if the Company issues a restatement of its reported financial results, or if it is determined that there was executive misconduct in a prior period that impacted the financial results for that period, the Compensation Committee will determine whether the restatement was material, and if so, to what extent “covered payments” should be returned to the Company to the extent that such payments were overstated as a result of the change in financial condition. Restatements of financial results that are the direct result of changes in accounting standards will not result in recovery of covered payments.

“Covered payments” are those payments that are eligible to be recovered by the Company under this policy including, without limitation, policies adopted to comply with applicable law, and include cash incentives paid to the NEOs for performance during the restated fiscal year(s). In addition, the Compensation Committee reserves the discretion to recover covered payments from other Company senior management employees, including all vice presidents and above, if the Compensation Committee deems it appropriate.

Compensation Committee Report

The Compensation Committee reviewed and discussed with the Company’s management the section of this Proxy Statement entitled “COMPENSATION DISCUSSION AND ANALYSIS”. In reliance on this review and discussion, the Compensation Committee recommended to the Board of Directors that the section entitled “COMPENSATION DISCUSSION AND ANALYSIS” be included in this Proxy Statement and incorporated by reference into the Endo International plc Annual Report on Form 10-K for the year ended December 31, 2015.

Submitted by the Compensation Committee of the Company’s Board of Directors.

Members of the Compensation Committee:

William P. Montague (Chairman)

Arthur J. Higgins (Member)

Michael Hyatt (Member)

William F. Spengler (Alternate)

 

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Compensation of Executive Officers and Directors

Summary Compensation Table

The following table sets forth the cash and non-cash compensation paid to or earned by our current President and Chief Executive Officer, Executive Vice President & Chief Financial Officer and the other three most highly compensated executive officers of the Company (collectively, the NEOs) for the years ending December 31, 2015, 2014 and 2013. For a complete understanding of the table, please read the footnotes and narrative disclosures that follow the table.

 

Name and Principal Position   Year     Salary ($)     Bonus ($)     Share
Awards
($)(1)
    Option
Awards
($)(1)
    Non-Equity
Incentive Plan
Compensation
($)(2)
    All Other
Compensation
($)(3)
    Total ($)  
Current (as of 12/31/15) Named Executive Officers:                                

Rajiv De Silva

President and Chief Executive Officer

   
 
 
2015
2014
2013
  
  
  
  $

$

$

  1,145,833

1,079,167

771,875

  

  

  

  $

$

$


  3,500,000

  

  

  

  $

$

$

  6,104,449

3,623,783

4,782,992

  

  

  

  $

$

$

  1,969,160

1,822,746

1,253,179

  

  

  

  $

$

$

1,687,110

2,819,608

2,193,750

  

  

  

  $

$

$

8,173

12,726,292

92,256

  

  

  

  $

$

$

  10,914,725

22,071,596

12,594,052

  

  

  

Suketu P. Upadhyay

Executive Vice President & Chief Financial Officer

   
 
 
2015
2014
2013
  
  
  
  $

$

$

625,000

595,833

157,019

  

  

  

  $

$

$


240,000

  

  

  

  $

$

$

2,406,241

1,470,210

1,595,917

  

  

  

  $

$

$

750,057

402,488

  

  

  

  $

$

$

486,936

708,840

186,006

  

  

  

  $

$

$

221,547

2,182,270

226,557

  

  

  

  $

$

$

4,489,781

5,599,641

2,165,499

  

  

  

Paul V. Campanelli

President, Par Pharmaceutical

    2015      $ 272,376      $      $ 3,664,071      $ 949,733      $ 1,064,000      $ 3,977      $ 5,954,157   

Matthew J. Maletta

Executive Vice President, Chief Legal Officer

    2015      $ 322,148      $      $ 1,466,873      $ 628,989      $ 338,894      $ 88,667      $ 2,845,571   

Susan Hall,

Executive Vice President, Chief Scientific Officer and Global Head of Research & Development and Quality

    2015      $ 512,500      $      $ 790,520      $ 249,871      $ 398,051      $ 169,775      $ 2,120,717   
Former Named Executive Officers                                

Camille I. Farhat (4)

President, American Medical Systems

   
 
 
2015
2014
2013
  
  
  
  $

$

$

429,840

567,769

528,846

  

  

  

  $

$

$

5,000,000

  

  

  

  $

$

$

1,205,895

1,458,475

698,245

  

  

  

  $

$

$

393,278

429,449

194,431

  

  

  

  $

$

$

260,773

500,797

542,438

  

  

  

  $

$

$

2,048,179

4,007,230

73,893

  

  

  

  $

$

$

9,337,965

6,963,720

2,037,853

  

  

  

 

  (1)

The amounts shown in this column represent the grant date fair value for each executive’s awards under ASC 718. The grant date fair value of our PSUs which are earned based on the Company’s stock price appreciation performance was determined using a Monte-Carlo variant valuation model, which considers a variety of potential future share prices for Endo as well as our peer companies in a selected market index. See further discussion of the provisions of our PSUs above in the “Performance Shares Units” section above. See notes 17, 17 and 16 to our audited financial statements included in the Endo International plc 2015, 2014 and 2013 Annual Reports on Form 10-K, respectively, for the assumptions we used in valuing and expensing these awards in accordance with ASC 718.

  (2)

The amounts shown in this column represent cash amounts earned pursuant to the Company’s IC program with respect to 2015, 2014 and 2013 performance, respectively. These amounts were awarded by the Committee on February 23, 2016, February 24, 2015 and February 26, 2014, respectively.

  (3)

The amounts shown in this column for 2015 include the items summarized in the table below:

 

Name and

Principal Position

 

Perquisites
& Other

Personal
Benefits (a)

   

Registrant
Contributions to
Defined
Contribution

Plans (b)

    Life Insurance
Premiums (c)
    Other (d)     Total  

Rajiv De Silva

  $      $ 7,333      $ 840      $      $ 8,173   

Suketu P. Upadhyay

  $ 216,288      $ 4,419      $ 840      $      $ 221,547   

Paul V. Campanelli

  $ 3,892      $      $ 85      $      $ 3,977   

Matthew J. Maletta

  $ 88,135      $      $ 532      $      $ 88,667   

Susan Hall

  $ 168,935      $      $ 840      $      $ 169,775   

Camille I. Farhat

  $ 77,499      $ 5,303      $ 840      $ 1,964,537      $ 2,048,179   

 

  (a)

Mr. Upadhyay received $203,960 for relocation assistance and $12,328 for financial planning services. Mr. Campanelli received $3,392 for car allowance and $500 for gym membership. Mr. Maletta received $80,180 for relocation assistance and $7,955 for financial planning services. Dr. Hall received $168,935 for cost of living adjustment. Mr. Farhat received relocation assistance of $63,779 and travel compensation of $13,720.

 

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  (b)

Represents the employers’ matching contribution to the Company’s Savings and Investment (401(k)) Plan.

  (c)

Represents annual premiums paid by the Company for executive term life insurance policies.

  (d)

Represents accrued vacation payout of $86,137 and severance payment of $1,878,400.

  (4)

Mr. Farhat received retention bonuses of $5,000,000 during the year ended December 31, 2015.

The employment agreements, short-term and long-term incentive compensation program and awards, explanation of amount of salary and bonus in proportion to total compensation, and other elements of the Summary Compensation Table are discussed at length in the “COMPENSATION DISCUSSION AND ANALYSIS” above.

2015 Grants of Plan-Based Awards

The following table summarizes grants of plan-based awards made to the NEOs during the year ended December 31, 2015.

 

Name and
Principal
Position
      Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (2)
    Estimated Future Payouts Under
Equity Incentive Plan Awards (3)
    All Other
Stock
Awards
(number of
shares of
stock or
units)
(#)(4)
    All Other
Option
Awards
(number of
securities
underlying
options)
(#)(4)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
   

Grant Date
Fair Value
of Stock &
Option
Awards

($)(5)

 
  Grant
Date (1)
  Threshold
($)
   

Target

($)

    Maximum
($)(6)
    Threshold
(#)
    Target
(#)
    Maximum
(#)(7)
         

Current (as of 12/31/15) Named Executive Officers:

  

                                                       

Rajiv De

Silva

  24 Feb 15   $      $   1,443,750      $   3,248,438                                    85,245      $ 85.25      $   1,969,160   
  24 Feb 15   $      $      $               69,290        207,870                    $      $ 6,104,449   

Suketu P.

Upadhyay

  24 Feb 15   $      $ 346,500      $ 779,625                                    32,470      $ 85.25      $ 750,057   
  24 Feb 15   $      $      $                             8,797             $      $ 749,944   
  24 Feb 15   $      $      $               17,595        52,785                    $      $ 1,550,120   
  11 Nov 15   $      $      $               4,450        13,350                    $      $ 106,177   

Paul V.

Campanelli

  28 Sep 15   $      $ 760,000      $ 1,710,000                                    56,920      $ 61.82      $ 949,733   
  28 Sep 15   $      $      $                             15,367             $      $ 949,988   
  28 Sep 15   $      $      $               30,734        92,202                    $      $ 1,202,621   
    3 Nov 15   $      $      $               72,632        217,896                    $      $ 1,461,356   
  11 Nov 15   $      $      $               2,100        6,300                    $      $ 50,106   

Matthew J.

Maletta

  29 Apr 15   $      $ 261,250      $ 587,813                                    13,403      $ 86.54      $ 312,354   
    31 Dec 15   $      $      $                                    17,394      $ 61.22      $ 316,635   
  29 Apr 15   $      $      $                             3,611             $      $ 312,496   
    31 Dec 15   $      $      $                             4,811             $      $ 294,529   
    29 Apr 15   $      $      $               7,222        21,666                    $      $ 509,657   
  11 Nov 15   $      $      $               500        1,500                    $      $ 11,930   
  31 Dec 15   $      $      $               4,811        14,433                    $      $ 338,261   

Susan Hall

  24 Feb 15   $      $ 283,250      $ 637,313                                    10,823      $ 85.25      $ 249,871   
  24 Feb 15   $      $      $                             2,932             $      $ 249,953   
    24 Feb 15   $      $      $               5,865        17,595                    $      $ 516,707   
    11 Nov 15   $      $      $               1,000        3,000                    $      $ 23,860   

Former Named Executive Officers

  

                                                       

Camille I.

Farhat

  24 Feb 15   $      $ 241,233      $ 542,774                                    17,025      $ 85.25      $ 393,278   
  24 Feb 15   $      $      $                             4,612             $      $ 393,173   
    24 Feb 15   $      $      $               9,225        27,675                    $      $ 812,722   

 

  (1)

The grant date of all awards is the date of the Board of Directors’ action in which such award is approved.

  (2)

The amounts shown in these columns represent the range of IC program payouts targeted for 2015 performance as described in the section titled “Performance-Based Annual Cash Incentive Compensation” in the “COMPENSATION DISCUSSION AND ANALYSIS” above. There is no threshold for this award. The bonus payment for 2015 performance has been made according to the metrics described and is shown in the Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

  (3)

The amounts shown in these columns represent the range of shares that may be released at the end of the 3-year performance period applicable to our PSUs assuming achievement of the relevant performance objectives, as described in the section titled “Equity-Based Long-term Incentive Compensation” in the “COMPENSATION DISCUSSION AND ANALYSIS” above. There is no threshold for this award. The PSU awards granted in 2015 were

 

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made according to the metrics described and are included in the Summary Compensation Table in the column titled “Share Awards.” The PSUs granted on February 24, 2015 were based on the Company’s 2014 LTI compensation payout. On April 29, 2015 and September 28, 2015, respectively, Mr. Maletta and Mr. Campanelli received special off-cycle PSU equity awards at the commencement of their employment with Endo International plc. On November 3, 2015, Mr. Campanelli received a special off-cycle PSU equity award, which represents Matched PSUs granted under the share matching program. On November 11, 2015, Mr. Upadhyay, Mr. Campanelli, Mr. Maletta and Dr. Hall received special off-cycle PSU equity awards which represent the Matched PSUs granted under the share matching program. On December 31, 2015, Mr. Maletta was awarded a discretionary PSU award in recognition of his contributions to Endo International plc.

  (4)

The options and RSUs granted on February 24, 2015 were based on the Company’s 2014 LTI compensation payout. On April 29, 2015 and September 28, 2015, respectively, Mr. Maletta and Mr. Campanelli received special off-cycle option and RSU equity awards at the commencement of their employment with Endo International plc. On December 31, 2015, Mr. Maletta was awarded a discretionary option and RSU award in recognition of his contributions to Endo International plc.

The 2015 equity incentive grant was made in February 2016 and is shown in more detail below:

 

Name   2015 Long-Term Equity
Incentive Compensation:
Number of Securities
Underlying Stock Options
(#)
   

Exercise or Base Price of
Option Awards

($/Sh)(a)

    2015 Long-Term Equity
Incentive Compensation:
Restricted Stock Units
(RSU) and Performance
Share Units (PSU) (#)(b)
    Grant Date Fair Value of
RSU, PSU & Option Awards
($)(c)
 

Rajiv De Silva

    167,897      $ 50.22        149,342      $ 12,516,354   

Suketu P. Upadhyay

    47,599      $ 50.22        42,337      $ 3,310,505   

Paul V. Campanelli

    39,875      $ 50.22        35,467      $ 2,773,310   

Matthew J. Maletta

    19,140      $ 50.22        17,025      $ 1,331,238   

Susan Hall

    22,481      $ 50.22        19,996      $ 1,563,569   

 

  (a) The exercise price is equal to the closing price on the date of grant, which was February 23, 2016.
  (b) The amounts shown in this column represent 100% PSUs for Mr. De Silva and approximately 67% PSUs and 33% RSUs for Mr. Upadhyay, Mr. Campanelli, Mr. Maletta and Ms. Hall.
  (c) The amounts shown in this column include the fair value under ASC 718 of the 2015 option awards on the date of grant determined using the Black-Scholes or Monte-Carlo variant valuation model, as appropriate. Additionally, amounts reflect the grant-date fair value of the PSUs which include both a performance and market-based variable as defined within ASC 718. Although the fair value of executive award grants listed above has been determined in accordance with the applicable accounting standards, values may not be indicative of the fair value observed in a willing buyer / willing seller market transaction.
  (5) The amounts shown in this column represent the fair value under ASC 718 of awards granted in 2015 valued on the date of grant (even if not yet vested) determined using the Black-Scholes or Monte-Carlo variant valuation model, as appropriate.
  (6) For the current NEOs, the amounts shown in this column represent the maximum IC payout as approved by the Board.
  (7) For the current NEOs, the amounts shown in this column represent the maximum number of shares related to our PSUs that could ultimately be released at the end of the 3-year performance period.

See “COMPENSATION DISCUSSION AND ANALYSIS” above regarding the material terms, determining amounts payable, vesting schedule and other material conditions of these grants, including pages 37 to 39 summarizing performance conditions associated with Endo’s PSU awards.

 

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Outstanding Equity Awards at December 31, 2015

The following table summarizes the number of securities underlying outstanding plan awards for the NEOs at December 31, 2015:

 

     Option Awards     Stock Awards  
Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(1)
    Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
    Option
Exercise
Price
($/Sh)
    Option
Expiration Date
    Number
of Shares
or Units of
Stock That
Have Not
Vested (#)
    Market Value
of Shares or
Units of Stock
That Have Not
Vested ($)(8)
    Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)
    Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)(9)
 

Rajiv De

Silva

           85,245             $ 85.25        24-Feb-2025             $             $   
    25,821        77,463             $ 63.82        2-Sep-2024             $             $   
      135,899                    $ 30.42        18-Mar-2023             $             $   
                         $               13,697(2)      $ 838,530             $   
                         $                    $        319,424(2)      $ 19,555,137   

Suketu P.

Upadhyay

           32,470             $ 85.25        24-Feb-2022             $             $   
    4,727        14,178             $ 79.33        26-Feb-2021             $             $   
                         $               17,740(3)      $ 1,086,043             $   
                       $                    $        51,310(3)      $ 3,141,198   

Paul V.

Campanelli

           56,920             $ 61.82        28-Sep-2025             $             $   
                       $               15,367(4)      $ 940,768             $   
                         $                    $        105,466(4)      $ 6,456,629   

Matthew J.

Maletta

           17,394             $ 61.22        31-Dec-2025             $             $   
           13,403             $ 86.54        29-Apr-2025             $             $   
                         $               8,422(5)      $ 515,595             $   
                         $                    $        12,533(5)      $ 767,270   

Susan Hall

           10,823             $ 85.25        24-Feb-2022             $             $   
                         $               7,515(6)      $ 460,068             $   
                         $                    $        13,740(6)      $   
                         $                    $             $ 841,163   

Camille I.

Farhat

    35,588                    $ 32.27        5-Sep-2022             $             $   
    4,257                    $ 85.25        24-Feb-2022             $             $   
      10,092                    $ 79.33        26-Feb-2021             $             $   
      2,424                    $ 30.80        27-Feb-2020             $             $   
                         $                    $        13,150(7)      $ 805,043   

 

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  (1)

The vesting dates of each option grant are listed in the table below by expiration date.

 

Expiration Data   Vesting Date   Expiration Date   Vesting Date

31-Dec-2025

 

25% on December 31, 2016

 

5-Sep-2022

 

25% on September 5, 2013

   

25% on December 31, 2017

   

25% on September 5, 2014

   

25% on December 31, 2018

   

25% on September 5, 2015

   

25% on December 31, 2019

   

25% on September 7, 2015

28-Sep-2025

 

25% on September 28, 2016

 

24-Feb-2022

 

25% on February 24, 2016

   

25% on September 28, 2017

   

25% on February 24, 2017

   

25% on September 28, 2018

   

25% on February 24, 2018

   

25% on September 28, 2019

   

25% on February 24, 2019

29-Apr-2025

 

25% on April 29, 2016

 

24-Feb-2022 *

 

25% on September 7, 2015

   

25% on April 29, 2017

   

25% on February 24, 2017

   

25% on April 29, 2018

   

25% on February 24, 2018

   

25% on April 29, 2019

   

25% on February 24, 2019

24-Feb-2025

 

25% on February 24, 2016

 

26-Feb-2021

 

25% on February 26, 2015

   

25% on February 24, 2017

   

25% on February 26, 2016

   

25% on February 24, 2018

   

25% on February 26, 2017

   

25% on February 24, 2019

   

25% on February 26, 2018

2-Sep-2024

 

25% on February 26, 2015

 

26-Feb-2021 *

 

25% on February 26, 2015

   

25% on February 26, 2016

   

25% on September 7, 2015

   

25% on February 26, 2017

   

25% on February 26, 2017

   

25% on February 26, 2018

   

25% on February 26, 2018

18-Mar-2023

 

33% on December 31, 2013

 

27-Feb-2020

 

25% on February 27, 2014

   

33% on December 31, 2014

   

25% on February 27, 2015

   

33% on March 18, 2016

   

25% on September 7, 2015

       

25% on February 27, 2017

* Vesting periods relate to Camille L. Farhat option grants

 

  (2)

These amounts are comprised of 13,697 RSUs granted on March 18, 2013, 164,364 PSUs granted on March 18, 2013, 85,770 PSUs granted on September 2, 2014 and 69,290 PSUs granted on February 24, 2015 (all of which vest on the third anniversary of the date of grant).

  (3)

These amounts are comprised of 5,139 RSUs granted on September 24, 2013 (which vest on the third anniversary of the date of grant), 15,418 PSUs granted on September 24, 2013 (which vest on the third anniversary of the date of grant), 3,804 RSUs granted on February 26, 2014 (which vest ratably over a three-year period on each of the second, third and fourth anniversaries of the date of grant), 10,147 PSUs granted on February 26, 2014, 3,700 Matched PSUs granted on November 14, 2014 (both of which vest on the third anniversary of the date of grant), 8,797 RSUs granted on February 24, 2015 (which vest ratably over a four-year period on each of the first, second, third and fourth anniversaries of the date of grant), 17,595 PSUs granted on February 24, 2015 and 4,450 PSUs granted on November 11, 2015 (both of which vest on the third anniversary of the date of grant).

  (4)

These amounts are comprised of 15,367 RSUs granted on September 28, 2015 (which vest ratably over a four-year period on each of the first, second, third and fourth anniversaries of the date of grant), 30,734 PSUs granted on September 28, 2015, 72,632 PSUs granted on November 3, 2015 and 2,100 PSUs granted on November 11, 2015 (all of which vest on the third anniversary of the date of grant).

  (5)

These amounts are comprised of 3,611 RSUs granted on April 29, 2015 (which vest ratably over a four-year period on each of the first, second, third and fourth anniversaries of the date of grant), 7,222 PSUs granted on April 29, 2015, 500 PSUs granted on November 11, 2015 (both of which vest on the third anniversary of the date of grant), 4,811 RSUs granted on December 31, 2015 (which vest ratably over a four-year period on each of the first, second, third and fourth anniversaries of the date of grant) and 4,811 PSUs granted on December 31, 2015 (which vest on the third anniversary of the date of grant).

  (6)

These amounts are comprised of 4,583 RSUs granted on March 11, 2014 (which vest ratably over a two-year period on each of the second and third anniversaries of the date of grant), 6,875 PSUs granted on March 11, 2014 (which vest on the third anniversary of the date of grant), 2,932 RSUs granted on February 24, 2015 (which vest ratably over a four-year period on each of the first second, third and fourth anniversaries of the date of grant), 5,865 PSUs granted on February 24, 2015 and 1,000 PSUs granted on November 11, 2015 (both of which vest on the third anniversary of the date of grant).

  (7)

These amounts are comprised of 5,854 PSUs granted on March 8, 2013 and 7,296 PSUs granted on July 1, 2013 (both of which vest on the third anniversary of the date of grant).

 

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  (8)

Value calculated by multiplying the number of unvested units by the closing price of $61.22 per share on December 31, 2015.

  (9)

Value calculated by multiplying the number of unvested units by the closing price of $61.22 per share on December 31, 2015. The values shown in this column are based on the number of units that would be earned at target performance. These amounts could range from zero to two times the amounts listed in this column depending on performance in relation to the terms of the PSUs, which are discussed in detail above the section titled “Equity-Based Long-term Incentive Compensation” in the “COMPENSATION DISCUSSION AND ANALYSIS.”

Option Exercises and Stock Vested in 2015

The following table summarizes the stock option exercises by the NEOs and share vestings during the year ended December 31, 2015.

 

     Option Awards     Stock Awards  
Name   Number of Shares
Acquired on Exercise (#)
    Value Realized on
Exercise ($)(1)
    Number of Shares
Acquired on Vesting (#)
    Value Realized on Vesting
($)(2)
 

Rajiv De Silva

         $             $   

Suketu P. Upadhyay

         $        6,408      $ 480,233   

Paul V. Campanelli

         $             $   

Matthew J. Maletta

         $             $   

Susan Hall

         $        2,292      $ 201,146   

Camille I. Farhat

    40,438      $ 2,221,117        25,195      $ 1,865,031   

 

  (1)

Amounts in this column were calculated by determining the difference between the market price of the underlying securities at exercise and the exercise price of the options and then multiplying this amount by the number of options exercised.

  (2)

Amounts in this column were calculated by determining the market price of the underlying securities on the vesting date and multiplying this amount by the number of awards vested.

 

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Potential Payments Upon Termination or Change in Control

The following tables show the potential payments upon termination or change of control to the NEOs, as if such event(s) took place on December 31, 2015. The amounts reflected in this table were determined in accordance using each NEO’s then existing employment agreement, individual award agreements and the respective equity plan to which each award relates. The equity award acceleration amounts below were calculated using the closing stock price of our stock on December 31, 2015 of $61.22.

As previously stated, Mr. Farhat has left the Company. Accordingly, the values shown for Mr. Farhat represent the amount actually received under his termination event.

 

Name   Cash Separation
Payment ($)(1)
    Health and Welfare
and Life Insurance
Benefits ($)(2)
    Disability Insurance
Benefits ($)(3)
    Acceleration of
Equity Awards (in the
money value at
December 31, 2015)
($)(4)
    Value of Term Life
Insurance ($)(5)
 

Termination for Cause, Resignation or Retirement

  

Mr. De Silva (6)

  $ -      $ -      $ -      $ -      $ -   

Mr. Upadhyay

  $ -      $ -      $ -      $ -      $ -   

Mr. Campanelli

  $ -      $ -      $ -      $ -      $ -   

Mr. Maletta

  $ -      $ -      $ -      $ -      $ -   

Dr. Hall

  $ -      $ -      $ -      $ -      $ -   

Mr. Farhat

  $ -      $ -      $ -      $ -      $ -   

Death

  

Mr. De Silva (6)

  $ -      $ -      $ -      $ 20,393,668      $ 1,000,000   

Mr. Upadhyay

  $ -      $ 22,776      $ -      $ 4,227,241      $ 1,000,000   

Mr. Campanelli

  $ -      $ 22,104      $ -      $ 7,397,396      $ 300,000   

Mr. Maletta

  $ -      $ 22,704      $ -      $ 1,282,865      $ 950,000   

Dr. Hall

  $ -      $ -      $ -      $ 1,301,231      $ 1,000,000   

Mr. Farhat

  $ -      $ -      $ -      $ -      $ -   

Disability

  

Mr. De Silva (6)

  $ -      $ -      $ 1,950,000      $ 5,869,712      $ -   

Mr. Upadhyay

  $ -      $ 35,944      $ 900,000      $ 314,610      $ -   

Mr. Campanelli

  $ -      $ 33,946      $ 1,594,000      $ 940,768      $ -   

Mr. Maletta

  $ -      $ 24,203      $ 590,000      $ 221,065      $ -   

Dr. Hall

  $ -      $ 17,508      $ 670,000      $ 280,571      $ -   

Mr. Farhat

  $ -      $ -      $ -      $ -      $ -   

Change of Control (COC)

  

Mr. De Silva (6)

  $ -      $ -      $ -      $ 15,313,203      $ -   

Mr. Upadhyay

  $ -      $ -      $ -      $ 1,791,603      $ -   

Mr. Campanelli

  $ -      $ -      $ -      $ -      $ -   

Mr. Maletta

  $ -      $ -      $ -      $ -      $ -   

Dr. Hall

  $ -      $ -      $ -      $ 420,888      $ -   

Mr. Farhat

  $ -      $ -      $ -      $ -      $ -   

Termination Without Cause or Quit for Good Reason

  

Mr. De Silva (6)

  $ 5,197,500      $ 35,800      $ -      $ 9,499,565      $ -   

Mr. Upadhyay

  $ 1,953,000      $ 35,944      $ -      $ 1,143,845      $ -   

Mr. Campanelli

  $ 3,420,000      $ 33,946      $ -      $ 1,403,999      $ -   

Mr. Maletta

  $ 1,472,500      $ 24,203      $ -      $ 230,947      $ -   

Dr. Hall

  $ 1,596,500      $ 17,508      $ -      $ 580,765      $ -   

Mr. Farhat

  $ 2,119,633      $ 17,256      $ -      $ 4,285,053      $ -   

Termination Without Cause or Quit for Good Reason Within 24 Months After COC

  

Mr. De Silva (6)

  $ 5,197,500      $ 35,800      $ -      $ 5,080,464      $ -   

Mr. Upadhyay

  $ 1,953,000      $ 35,944      $ -      $ 2,435,638      $ -   

Mr. Campanelli

  $ 3,420,000      $ 33,946      $ -      $ 7,397,396      $ -   

Mr. Maletta

  $ 1,472,500      $ 24,203      $ -      $ 1,282,865      $ -   

Dr. Hall

  $ 1,596,500      $ 17,508      $ -      $ 880,344      $ -   

Mr. Farhat

  $ -      $ -      $ -      $ -      $ -   

 

  (1)

As of December 31, 2015, in the event of a Termination Without Cause by the Company or a Quit For Good Reason by any of the NEOs, the Cash Separation Payment is equal to two times the sum of the NEO’s current base salary plus target annual Incentive Compensation, payable in a lump-sum. In the event of Termination Without Cause by the Company or a Quit For Good Reason by any of the NEOs within 24 months after a Change of Control (COC), all

 

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NEOs will receive a Cash Separation Payment equal to two times the sum of their current base salary plus target annual Incentive Compensation, payable in a lump-sum.

  (2)

Upon a Termination Without Cause by the Company or a Quit For Good Reason by any of the NEOs, health and welfare benefits including medical, dental, and vision as well as life insurance benefits will continue to be provided, on a monthly basis, to each NEO for a period of 24 months subsequent to termination. Upon termination for Disability for all NEOs (other than Mr. De Silva under his employment agreement in effect on December 31, 2015) , health and welfare benefits including medical, dental, and vision as well as life insurance benefits will continue to be provided, on a monthly basis, to each NEO for a period of 24 months subsequent to termination. Additionally, upon termination for Death for all NEOs (other than Mr. De Silva under his employment agreement in effect on December 31, 2015), health and welfare benefits including medical, dental, and vision insurance benefits will continue to be provided to their dependents, if any, on a monthly basis, for a period of 24 months subsequent to termination.

  (3)

Upon Disability of any of the NEOs, disability insurance benefits will be paid to the NEO equal to the excess of 24 months’ base salary over the their respective disability benefits. As of December 31, 2015, the disability insurance benefit for each NEO other than Mr. Campanelli totaled $15,000 per month. As of December 31, 2015, the disability insurance benefit for Mr. Campanelli totaled $12,750 per month. The amount represented in the table above is the difference between each NEO’s monthly base salary and their respective monthly disability insurance benefit over a 24-month period.

  (4)

The provisions governing acceleration of equity awards are discussed separately for each scenario below, as follows:

  (a)

Upon Termination for Cause or Voluntary Resignation - all unvested equity held by our NEOs is forfeited and no amounts have been included under this scenario.

  (b)

Upon Retirement—none of our NEOs are eligible for Retirement as of December 31, 2015 under any of our equity incentive plans and no amounts have been included under this scenario.

  (c)

Upon Death—each of the NEO’s outstanding and unvested stock options and RSUs will accelerate and become immediately vested and if applicable, exercisable. Each of the NEO’s outstanding and unvested PSUs and Matched PSUs will accelerate and become immediately vested and deemed to be earned at target performance levels. Mr. De Silva’s Matched PSUs granted in 2013 will accelerate and become immediately vested based upon actual performance levels (for purposes of the value represented in the table above, target performance has been assumed).

  (d)

Upon Disability—for Mr. De Silva only, none of the outstanding and unvested equity would accelerate with the exception of his RSUs and Matched PSUs granted in 2013, which will accelerate and become immediately vested. Mr. De Silva’s Matched PSUs granted in 2013 will accelerate and become immediately vested based upon actual performance levels (for purposes of the value represented in the table above, target performance has been assumed). For Mr. Upadhyay only, none of the outstanding and unvested equity would accelerate with the exception of the RSUs granted in 2013, which will accelerate and become immediately vested. For Mr. Campanelli only, none of the outstanding and unvested equity would accelerate with the exception of the stock options and RSUs granted in 2015, which will accelerate and become immediately vested, and if applicable, exercisable. For Mr. Maletta only, none of the outstanding and unvested equity would accelerate with the exception of the stock options and RSUs granted in April 2015, which will accelerate and become immediately vested, and if applicable, exercisable. For Dr. Hall only, none of the outstanding and unvested equity would accelerate with the exception of the RSUs granted in 2014, which will accelerate and become immediately vested.

  (e)

Upon a Change of Control (COC)—for Mr. De Silva and Mr. Upadhyay only, any performance goals imposed on all outstanding and unvested PSUs granted in 2013 shall be deemed to be earned at target performance levels. For Mr. De Silva only, all of his outstanding and unvested Matched PSUs granted in 2013 will accelerate and become immediately earned based upon actual performance levels. For Mr. De Silva, Mr. Upadhyay and Dr. Hall only, all of their respective outstanding and unvested PSUs granted in 2014 will accelerate and become immediately earned based upon actual performance levels. For Mr. Upadhyay only, all of his outstanding and unvested Matched PSUs granted in 2014 will accelerate and become immediately earned based upon actual performance levels. For purposes of the values represented in the table above, target performance has been assumed for all outstanding and unvested PSUs and Matched PSUs. For all NEOs, outstanding and unvested PSUs and Matched PSUs granted in 2015 and all other outstanding and unvested stock options and RSUs would not accelerate upon a COC without termination as these awards require a “double-trigger” in order for such awards to accelerate and become immediately vested and if applicable, exercisable.

  (f)

Upon Termination Without Cause by the Company or Quit For Good Reason by the Executive—for all NEOs, any unvested and outstanding PSUs and Matched PSUs granted in 2014 and 2015 will accelerate and become immediately vested on a pro-rated basis (for service actually completed during the performance period) based upon actual performance levels (for purposes of the values represented in the table above, target performance has been assumed on a pro-rata basis). For Mr. De Silva only, all unvested and outstanding RSUs and Matched PSUs granted in 2013 will accelerate and become immediately vested. Mr. De Silva’s Matched PSUs granted in 2013 are based on actual performance levels but for purposes of the

 

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value represented in the table above, target performance has been assumed. For Mr. Upadhyay only, all unvested and outstanding RSUs granted in 2013 will accelerate and become immediately vested. Dr. Hall would vest in the portion of her 2014 RSU grant that would have vested had she remained employed for an additional two years. Mr. Maletta would vest in the portion of his April 2015 stock option and RSU grant that would have vested had he remained employed for an additional two years. All other outstanding and unvested equity awards held by NEOs will be forfeited.

  (g)

Upon Termination Without Cause by the Company or a Quit For Good Reason by the Executive Within 24 Months After COC—for all NEOs, all outstanding and unvested stock options and RSUs will accelerate and become immediately vested, and if applicable, fully exercisable. For all NEOs, 2015 PSUs and Matched PSUs, to the extent assumed or substituted, will accelerate and become immediately vested based on actual performance levels (for purposes of the values represented in the table above, target performance has been assumed).

  (5)

Each of our NEOs is covered by term life insurance policies, the premiums for which are reimbursed by the Company. The premiums for these term life insurance policies are listed above in the “All Other Compensation” table. The amounts included above represent the death benefits that would be received from the insurance provider under these life insurance policies.

  (6)

The amounts set forth in the table above represent amounts payable to Mr. De Silva under his employment agreement in effect December 31, 2015. See “COMPENSATION DISCUSSION AND ANALYSIS”, on page 45, for additional information on Mr. De Silva’s post-termination benefits under the employment agreement entered into with him on February 28, 2016.

2015 Compensation of Non-Employee Directors

Following the formation of Endo International plc as an Irish holding company, the Compensation Committee reviewed compensation for each non-employee director who was not affiliated with the Company (Non-Affiliated Directors). In connection with this review, the Compensation Committee’s consultant, Hay Group, assessed the compensation paid to the Non-Affiliated Directors against non-employee director compensation trends and data from Endo’s Pay Comparator Companies. After consultation with Hay Group, the Compensation Committee found it appropriate to establish a compensation structure for Non-Affiliated Directors in support of competitive practices observed among Endo’s Pay Comparator Companies.

In addition to offering a competitively positioned compensation package, our objective is to award a meaningful portion of compensation in the form of equity to further align the interests of Non-Affiliated Directors with the interests of Endo shareholders. The Compensation Committee annually reviews compensation paid to Non-Affiliated Directors against pay levels observed among Endo’s Pay Comparator Companies and makes recommendations for adjustments, as appropriate, to the full Board of Directors. In late 2015, the Board of Directors determined that it was in the best interests of the Company to amend the 2015 Stock Incentive Plan to incorporate a limit on the value of annual equity awards that may be granted to Non-Affiliated Directors. As indicated under Proposal 6, one reason for the amendment is to limit the value of equity grants that may be made to Non-Affiliated Directors of the Company to $750,000. The Board of Directors believes that this amendment will promote good compensation governance practices in support of shareholder interests. There have been no changes to our Non-Affiliated Directors compensation program since Endo International plc was formed.

Non-Affiliated Directors are eligible for the following compensation:

Annual Cash Retainer Fees. Each Non-Affiliated Director receives an annual cash retainer of $140,000. Also, any Non-Affiliated Director who serves as the Chair of the Board of Directors receives an additional fee of $200,000 cash per year. Non-Affiliated Directors who serve as members or alternates of the Audit Committee, the Compensation Committee, the Transactions Committee, or the Operations Committee receives a fee of $20,000 cash per year, and any Non-Affiliated Director who serves as a member or alternate of the Nominating & Governance Committee receives a fee of $12,500 cash per year. In addition, any Non-Affiliated Director who serves as the Chair of the Audit Committee, the Compensation Committee, the Transactions Committee, or the Operations Committee receives an additional fee of $30,000 cash per year, and any Non-Affiliated Director who served as the Chair of the Nominating & Governance Committee receives an additional fee of $15,000 cash per year. However, Mr. Kimmel elected to waive the cash retainer fee associated with his chairing the Nominating & Governance Committee.

Meeting Fees. Non-Affiliated Directors receive a fee of $5,000 cash per trip to Ireland on Company business, other than regularly scheduled meetings in Ireland.

Stock-based Awards. Non-Affiliated Directors receive the stock compensation described below:

  ¡  

Each Non-Affiliated Director receives an annual stock award equal in value to $300,000, 100% of which is ordinary shares. The number of ordinary shares actually awarded to each Non-Affiliated Director is calculated using the closing price as of the date of the grant.

  ¡  

The annual stock award grant date is typically in early March of each year and the exercise price of the securities granted, if applicable, is the closing price on the date of grant.

All cash retainer fee payments will be made on March 1 of each year of service. In the event that a Non-Affiliated Director does not complete a full year of service following the date of such payments, a pro-rated portion of the cash retainer fees and ordinary shares will be returned to the Company if so requested by the Compensation Committee.

On March 1, 2016, Non-Affiliated Directors each received 7,111 pre-tax shares of stock valued at $42.19 per share (the closing price on the day of grant). Pursuant to the Directors Stock Election Plan (described below), Mr. Higgins elected to receive cash

 

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retainer fees in the form of Endo ordinary shares. In connection with this election, Mr. Higgins received 4,741 shares in lieu of annual cash retainer fees.

Directors Stock Election Plan. Under the Directors Stock Election Plan, Non-Affiliated Directors may elect to have some, or all of their retainer fees delivered in the form of Endo ordinary shares. The amount of shares will be determined by dividing the portion of cash fees elected to be received as shares by the closing price of the shares on the day the payment would have otherwise been paid in cash.

Additional Arrangements. The Company pays for or provides (or reimburses directors for out-of-pocket costs incurred for) transportation, hotel, food and other incidental expenses related to attending Board and committee meetings or participating in director education programs and other director orientation or educational meetings.

Insurance and Indemnification. The Company has retained directors and officers indemnification insurance coverage. This insurance covers Non-Affiliated Directors and officers individually, in the event the Company is unable to provide indemnification.

The following table provides information concerning the compensation of the Company’s Non-Affiliated Directors for 2015. Directors who are employees of the Company receive no additional compensation for their services as directors or as members of Board committees. For a complete understanding of the table, please read the footnotes and the narrative disclosures that follow the table.

 

Name   Length of Service   Fees Earned or
Paid in Cash ($)(1)
    Stock
Awards ($)(2)(3)
    All Other
Compensation ($)
    Total ($)  

Roger H. Kimmel

  2 Years   $ 422,500      $ 300,000      $      $ 722,500   

Shane M. Cooke

  1 Year 6 Months   $ 180,000      $ 300,000      $      $ 480,000   

John J. Delucca

  2 Years   $ 210,000      $ 300,000      $      $ 510,000   

Arthur J. Higgins

  2 Years   $ 205,000      $ 300,000      $      $ 505,000   

Nancy J. Hutson, Ph.D.

  2 Years   $ 237,500      $ 300,000      $      $ 537,500   

Michael Hyatt

  2 Years   $ 232,500      $ 300,000      $      $ 532,500   

William P. Montague

  2 Years   $ 252,500      $ 300,000      $      $ 552,500   

Jill D. Smith

  2 Years   $ 202,500      $ 300,000      $      $ 502,500   

William F. Spengler

  2 Years   $ 240,000      $ 300,000      $      $ 540,000   

 

  (1)

The amounts in this column include all fees earned by each Non-Affiliated Director. Non-Affiliated Directors may elect, pursuant to the Endo International plc Directors Stock Election Plan, to receive all or a portion of their retainer and/or meeting fees in Endo ordinary shares. The following table summarizes, for each of the Non-Affiliated Directors who elected to receive all or a portion of such fees in Endo shares, the amounts of such non-cash compensation included in the table above. The dollar amounts represent the number of shares granted multiplied by the trading price of Endo’s stock at the time of payment:

 

Name   Fees Paid in Endo
Ordinary Shares ($)
 

Roger H. Kimmel

  $ 288,800   

Arthur J. Higgins

  $ 200,000   

 

  (2)

The amounts shown in this column represent the grant date fair value for each Non-Affiliated Director’s share-based awards under ASC 718. The stock awards reflect compensation for services for the twelve months ended March 1, 2016. See note 17 to our audited financial statements included in the Endo International plc 2015 Annual Report on Form 10-K for the assumptions we used in valuing and expensing these awards in accordance with ASC 718. The grant date fair value of each option and stock award granted in 2015, computed in accordance with ASC 718, is as follows:

 

Name   Grant Date   Fair Value on Grant Date
of Restricted Stock ($)
 

Roger H. Kimmel

  March 2, 2015   $ 300,000   

Shane M. Cooke

  March 2, 2015   $ 300,000   

John J. Delucca

  March 2, 2015   $ 300,000   

Arthur J. Higgins

  March 2, 2015   $ 300,000   

Nancy J. Hutson, Ph.D.

  March 2, 2015   $ 300,000   

Michael Hyatt

  March 2, 2015   $ 300,000   

William P. Montague

  March 2, 2015   $ 300,000   

Jill D. Smith

  March 2, 2015   $ 300,000   

William F. Spengler

  March 2, 2015   $ 300,000   

 

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  (3)

The following table summarizes the number of stock options and restricted stock units outstanding and exercisable at December 31, 2015, for each Non-Affiliated Director in 2015:

 

Name  

Options

Outstanding at
Fiscal Year End (#)

   

Options

Exercisable at
Fiscal Year End (#)

    Restricted Stock
Units Outstanding
at Fiscal Year End (#)
    Value at Fiscal
Year End ($)(a)
 

Roger H. Kimmel

    14,858        14,858        21,589      $ 1,871,889   

Shane M. Cooke

                       $   

John J. Delucca

                       $   

Arthur J. Higgins

                       $   

Nancy J. Hutson, Ph.D.

    13,185        13,185        6,515      $ 925,313   

Michael Hyatt

    29,809        29,809             $ 1,154,780   

William P. Montague

    18,478        18,478        23,108      $ 2,178,645   

Jill D. Smith

                       $   

William F. Spengler

    23,649        23,649        23,108      $ 2,371,626   

 

  (a)

Based upon the closing price on December 31, 2015 of $61.22. Includes all restricted stock units and all outstanding options as of December 31, 2015, for which the exercise price is equal to or less than $61.22 per share.

 

 

Other Information Regarding the Company

Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners and Management. The following table sets forth, as of April 14, 2016, the name, address and holdings of each person, including any “group” as defined in Section 13(d)(3) of the Exchange Act, known by Endo to be the “beneficial owner” of more than 5% of issued ordinary shares. Footnote (a) below provides a brief explanation of what is meant by the term “beneficial ownership.” The following table also sets forth, as of April 14, 2016, the number of ordinary shares beneficially owned by each of the Company’s then current directors and the Chief Executive Officer, the Chief Financial Officer and the other three most highly compensated executive officers of the Company as of April 14, 2016. The following table also sets forth, as of April 14, 2016, the number of ordinary shares beneficially owned by all then current directors and executive officers of the Company as a group.

 

Name of Beneficial Owner   Number of
Ordinary Shares
Beneficially Owned
(#)(a)
    Percentage of
Class (%)(a)
 

Directors and Executive Officers:

     

Roger H. Kimmel (b)

    [X     [X

Shane M. Cooke (c)(o)

    [X     [X

Arthur J. Higgins (d)(o)

    [X     [X

Nancy J. Hutson, Ph.D. (e)(o)

    [X     [X

Michael Hyatt (f)

    [X     [X

William P. Montague (g)(o)

    [X     [X

Jill D. Smith (h)(o)

    [X     [X

William F. Spengler (i)(o)

    [X     [X

Rajiv De Silva (j)(o)

    [X     [X

Suketu P. Upadhyay (k)(o)

    [X     [X

Paul V. Campanelli (l)(o)

    [X     [X

Matthew J. Maletta (m)(o)

    [X     [X

Susan T. Hall (n)(o)

    [X     [X

All current directors and executive officers of the Company as a group (13 persons)

    [X     [X

Other Shareholders:

     

Janus Capital Management LLC (p)

    [X     [X

Capital Research Global Investors (q)

    [X     [X

BlackRock Institutional Trust Company, N.A. (r)

    [X     [X

The Vanguard Group, Inc. (s)

    [X     [X

Fidelity Management & Research Company (t)

    [X     [X

* The percentage of the class to be owned by such security holder represents less than 1%.

  (a)

“Beneficial ownership” is a term broadly defined by the SEC in Rule 13d-3 under the Exchange Act, and includes more than the typical form of share ownership, that is, shares held in the person’s name. The term also includes

 

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what is referred to as “indirect ownership,” meaning ownership of shares as to which a person has or shares investment power. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares as of a given date that such person has the right to acquire within 60 days after such date.

  (b)

Mr. Kimmel is the Chairman of the Board of Endo. The business address for Mr. Kimmel is c/o Rothschild, Inc., 1251 Avenue of the Americas, New York, New York 10020. Mr. Kimmel’s beneficial ownership represents (i) options to purchase [X] shares of ordinary shares granted under the Endo Health Solutions Inc. 2004 and 2007 Stock Incentive Plans which will be exercisable within the next 60 days, (ii) [X] directly owned ordinary shares or shares which he has the right to acquire within 60 days and (iii) [X] ordinary shares held in trusts for which Mr. Kimmel serves as trustee and as to which shares Mr. Kimmel holds either the sole or the shared power of disposition and power to vote. His beneficial ownership excludes [X] ordinary shares held in trust.

  (c)

Mr. Cooke is a director of the Company. Mr. Cooke’s beneficial ownership represents [X] directly owned ordinary shares.

  (d)

Mr. Higgins is a director of