DEF 14A
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UNITED STATES SECURITIES 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.     )

 

  Filed by the Registrant      Filed by a Party other than the Registrant

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  Definitive Proxy Statement
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  Soliciting Material Pursuant to Section 240.14a-12

 

  Endo International plc

(Name of Registrant as Specified in Its Charter)

 

         

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LOGO

 

 

  2020     

Notice of the

2020 Annual

General Meeting

of Shareholders

and Proxy Statement

 

 

 

 

 

 

June 11, 2020 at 8:00 a.m., Dublin, Ireland 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

 

Dear Fellow Shareholders:

As I report to you for the first time as President and Chief Executive Officer, I want to express my appreciation for your commitment to and investment in Endo International plc (Endo). I am honored to lead Endo into its next phase and to build on the work begun under Paul Campanelli’s leadership. I would like to thank Paul for his many contributions and his ongoing service as Chairman of the Board. I am pleased with the progress we have made in reshaping Endo and establishing a strong foundation for our ongoing transformation.

While I prepare this letter to you, the global coronavirus (COVID-19) pandemic continues to evolve. We have taken a range of proactive measures to provide for the well-being of our team members while continuing to produce the critical medicines that hospitals and healthcare providers need to treat patients, including those with COVID-19. Additionally, to help meet current and ongoing needs related to COVID-19, we are donating over $5 million in product and monetary support to Americares and the Red Cross. I want to thank Endo’s nearly 3,200 team members around the globe for their incredible dedication to providing safe, high-quality products to our customers.

Delivering on our Commitments

2019 was a successful year for Endo on many fronts. Our Sterile Injectables segment and the Specialty Products portfolio of our Branded Pharmaceuticals segment both delivered double-digit growth. This growth was led by our flagship products XIAFLEX ® and VASOSTRICT ® , which grew 24% and 17%, respectively. The investment in our highly effective disease awareness campaigns and the successful execution of an integrated commercial strategy drove expanded awareness of both Peyronie’s Disease and Dupuytren’s Contracture Disease and drove increased utilization of XIAFLEX ® .

In 2019, we also made significant progress in preparing to successfully commercialize collagenase clostridium histolyticum (CCH) for the treatment of cellulite in the buttocks. The U.S. Food and Drug Administration (FDA) accepted our Biologics License Application (BLA), and the product’s Prescription Drug User Fee Act date, or target action date, has been set for July 6, 2020. If approved, we believe Endo is well-positioned to create a new product category within the growing U.S. medical aesthetics market with the first FDA-approved injectable option to treat cellulite in the buttocks.

Additionally, in 2019, we launched 14 products across our Sterile Injectables and Generic Pharmaceuticals segments while navigating a dynamic and competitive generic landscape.

These actions, among others, contributed to our strong 2019 operating results.

Focused Investment in Growth Opportunities

In 2020, we will continue to focus investments in our core growth areas: our Sterile Injectables segment, the Specialty Products portfolio of our Branded Pharmaceuticals segment and preparing for our anticipated entrance into the U.S. medical aesthetics market. We have taken and will continue to take a long-term approach with respect to how we manage the business, focused on methodically executing against our strategic priorities to create value.


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While the COVID-19 pandemic may impact the timing of our plans, we continue to prepare for the successful commercialization of CCH for the treatment of cellulite subsequent to the anticipated second half 2020 FDA approval of the BLA. We are very excited by the opportunity to enter the U.S. medical aesthetics market.

Additionally, we have initiated development programs related to potential new indications for XIAFLEX ® for the treatment of plantar fibromatosis and adhesive capsulitis. We also plan to launch approximately 15 products across our Sterile Injectables and Generic Pharmaceuticals segments in 2020. This includes the initial product from our strategic development, license and commercialization agreement with Nevakar, Inc., which is part of our Sterile Injectable strategy to launch Ready-to-Use products to meet the evolving product needs of hospitals and health systems. We believe that these strategic investments in our portfolio will generate long-term value for Endo.

Guided by Values. Focused on a Sustainable Future.

Anchored by our commitment to integrity, we are passionate about our efforts to improve lives, and that responsibility is ingrained in all that we do. The opportunity to improve lives and make a difference informs our decisions and focuses the efforts of all Endo teammates. At Endo, we always strive to do the right thing to deliver meaningful value to our customers, patients, shareholders and communities.

As we continue our journey in 2020, we seek to manage Endo for the future in order to create continued, sustainable value. As part of this journey, we are committed to transparency, including reporting applicable SASB (Sustainability Accounting Standards Board) metrics. We aspire to be a best-in-class corporate citizen through our transparency with customers, shareholders, patients and employees and by creating a safe and environmentally conscious work environment.

Leading Through Uncertainty

Our values and commitment to our patients, customers and communities have been especially evident as we navigate through the challenges and uncertainties related to the global COVID-19 pandemic. As I reflect on the past few months, I am proud of the tireless dedication demonstrated by our team members—those who are able to help flatten the outbreak’s curve by working from home, and others on the front line enabling Endo to reliably supply the high quality, medically necessary and life-saving products required by patients and their healthcare providers.

We remained committed and focused on delivering sustainable operating results and achieving our long-term objectives, although COVID-19 may temporarily impact our near-term performance. I believe we have significant opportunities to create sustainable shareholder value over the long term and I am personally excited about the future of Endo and leading the dedicated and talented Endo team. Thank you for your investment and putting your trust in us.

We encourage you to read more about our Board of Directors, corporate governance practices and performance-driven compensation programs in this Proxy Statement. We hope that you will participate in the 2020 Annual General Meeting of Shareholders (the Annual Meeting), which will be held on June 11, 2020 at 8:00 a.m., Dublin, Ireland time, at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland, by voting through acceptable means as described in this Proxy Statement as promptly as possible. Your vote is important—so please exercise your right.

Sincerely,

 

 

LOGO

Blaise Coleman

President, Chief Executive Officer and Director

Dublin, Ireland

April 28, 2020


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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 11, 2020

8:00 a.m., Dublin, Ireland time

First Floor, Minerva House,

Simmonscourt Road, Ballsbridge, Dublin 4, Ireland

Notice is hereby given that the 2020 Annual General Meeting of Shareholders of Endo International plc, an Irish public limited company, will be held on June 11, 2020 at 8:00 a.m., Dublin, Ireland time, at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

The purposes of the meeting are:

 

(1)

To elect, by separate resolutions, eight members to our Board of Directors to serve until the next Annual General Meeting of Shareholders;

 

(2)

To approve, on an advisory basis, the compensation of our named executive officers (say-on-pay);

 

(3)

To approve the Endo International plc Amended and Restated 2015 Stock Incentive Plan;

 

(4)

To renew the Board’s existing authority to issue shares under Irish law;

 

(5)

To renew the Board’s existing authority to opt-out of statutory pre-emption rights under Irish law;

 

(6)

To approve the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the year ending December 31, 2020 and to authorize the Board of Directors, acting through the Audit Committee, to determine the independent registered public accounting firm’s remuneration; and

 

(7)

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

Proposals 1 through 4 and 6 are ordinary resolutions requiring the approval of a simple majority of the votes cast at the Annual Meeting. Proposal 5 is a special resolution requiring the approval of not less than 75% of the votes cast at the Annual 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, 2019, including the reports of the directors and auditors thereon, will be presented and considered 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 also will include a review of the Company’s affairs.

Only shareholders of record at the close of business on April 13, 2020 (the record date) are entitled to notice of and to vote at the Annual Meeting and any adjournment thereof.

 


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This year, we have elected to continue 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, by telephone or by attending the Annual Meeting and voting in person by ballot so that, whether you intend to attend 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(es) of such person(s) in the proxy card.

Special Precautions Due to COVID-19 Concerns:

In light of public health concerns related to COVID-19, the Company would like to emphasize that we consider the health of our shareholders, employees and other attendees a top priority. We are monitoring guidance issued by the Irish Health Service Executive (HSE), the Irish government, the U.S. Centers for Disease Control and Prevention and the World Health Organization, and we have implemented, and will continue to implement, the measures advised by the HSE to minimize the spread of COVID-19.

Based on the latest available public health guidance, we expect that the Annual Meeting will proceed under very constrained circumstances given current restrictions on public gatherings.

Shareholders’ input at the Annual Meeting is valued. Shareholders are strongly encouraged, however, to vote their shares by proxy as the preferred means of fully and safely exercising their rights. Personal attendance at the Annual Meeting may present a health risk to shareholders and others. The Company advises that shareholders who are experiencing any COVID-19 symptoms or anyone who has been in contact with any person experiencing any COVID-19 symptoms should not attend the Annual Meeting in person.

The Company may take additional procedures or limitations on meeting attendees, including limiting seating, requiring health screenings and other reasonable or required measures in order to enter the building.

In the event that a change of venue becomes necessary due to public health recommendations regarding containment of COVID-19, which may include the closure of or restrictions on access to the meeting venue, we will promptly communicate this to shareholders by an announcement in a press release, on the investor relations page of http://investor.endo.com/ and a filing with the U.S. Securities and Exchange Commission. We advise shareholders to monitor the page regularly, as circumstances may change on short notice. We recommend that shareholders keep up-to-date with the latest public health guidance regarding travel, self-isolation and health and safety precautions.

 

By Order of the Board of Directors,

 

 

LOGO

Yoon Ah Oh

Corporate Secretary

Dublin, Ireland

April 28, 2020

Endo International plc

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

Registered in Ireland: Number—534814

Directors: Paul Victor Campanelli (USA), Blaise Coleman (USA), Mark Gilbert Barberio (USA), Shane Martin Cooke (Ireland), Nancy June Hutson (USA), Michael Hyatt (USA), Roger Hartley Kimmel (USA), William Patrick Montague (USA).


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LOGO

Proxy Statement for 2020 Annual General Meeting of Shareholders

 

 

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General Information

     1  

Proposal 1: Election of Directors

     4  

Proposal 2: Advisory Vote on the Compensation of Our Named Executive Officers (Say-on-Pay)

     19  

Proposal 3: Approval of the Endo International plc Amended and Restated 2015 Stock Incentive Plan

     56  

Proposal 4: Renewal of the Board’s Existing Authority to Issue Shares under Irish Law

     63  

Proposal 5: Renewal of the Board’s Existing Authority to Opt-Out of Statutory Pre-Emption Rights under Irish Law

     64  

Proposal 6: Approval of Appointment of Independent Registered Public Accounting Firm and Authorization to Determine the Firm’s Remuneration

     66  

Other Information Regarding the Company

     69  

Annex 1

     A-1  


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Proxy Statement for 2020 Annual General Meeting of Shareholders

 

 

General Information

We are providing these proxy materials in connection with the solicitation by the Board of Directors of Endo International plc (the Board), an Irish public limited company, of proxies to be voted at the Annual Meeting to be held on June 11, 2020, beginning at 8:00 a.m., Dublin, Ireland 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 U.S. Securities and Exchange Commission (SEC), we are furnishing the Proxy Statement for Annual Meeting, 2019 Annual Report on Form 10-K and 2019 Irish Statutory Financial Statements (collectively, the proxy materials) by providing access to these materials electronically on the internet. We expect to provide access to the 2019 Irish Statutory Financial Statements on or about May 7, 2020. 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. We will provide printed copies 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 28, 2020. This Notice of Internet Availability is being mailed in lieu of the printed proxy materials and contains instructions for our shareholders on how they may: (i) access and review our proxy materials on the internet; (ii) submit their proxy; and (iii) request 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 proxy materials electronically enables us to save costs associated with printing and delivering the materials and reduces 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 required by the context, references in this proxy statement to “Endo,” the “Company,” “we,” “our” or “us” refer to Endo International plc and its subsidiaries.

Annual General 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.

In light of public health concerns related to COVID-19 and protocols recommended or required by governmental authorities, the Company may impose additional restrictions on your ability to attend the Annual Meeting in person, including limiting seating, requiring health screenings and other reasonable or required measures in order to enter the building.

Shareholders Entitled to Vote

Holders of ordinary shares at the close of business on April 13, 2020 are entitled to receive this notice and to vote their shares at the Annual Meeting. As of that date, there were 229,704,690 issued and outstanding 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, by telephone or by attending the Annual Meeting and voting in person by ballot as described below.

The Company encourages shareholders to vote by internet, by mail or by telephone, rather than attend the Annual Meeting in person in light of the public health concerns related to COVID-19. Please refer to “Special Precautions Due to COVID-19 Concerns” in the Notice of Annual General Meeting of Shareholders above for more information.

How to Vote

If you are a shareholder of record, you may vote by internet, by mail, by telephone or by attending the Annual Meeting and voting in person by ballot. If you receive a paper copy of the proxy materials, which will include a proxy card, you can vote by mail by simply completing your proxy card, dating and signing it, and returning it in the postage-paid envelope provided.

 

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For additional instructions on how shareholders of record can vote using any of the methods set forth above, please visit www.proxyvote.com , enter the control number found on the Notice of Internet Availability (or, if you request to receive a paper copy of the proxy materials, the proxy card) and follow the steps outlined on the secure website.

Deadline for Voting by Internet, by Mail or by Telephone

Internet and telephone votes must be received by 11:59 PM U.S. Eastern Time on June 10, 2020. If you are a shareholder of record and choose to vote by mail, your properly completed proxy card should be received by 8:00 a.m., Dublin, Ireland time on June 9, 2020.

Additional Information on Voting at the Annual Meeting

Voting by internet, by mail or by telephone 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 in accordance with your instructions at the Annual Meeting. If you execute your proxy but do not give voting instructions, the ordinary shares represented by that proxy will be voted as described below under the section entitled “General Information on Voting and Required Vote.”

Additional Information for Beneficial Owners of Shares Held Through a Bank or Brokerage Firm

If you are a beneficial owner of shares held through a bank or brokerage firm, please follow the voting instructions provided by your bank or brokerage firm.

 

Electronic Access to Investor Information

 

Endo’s Proxy Statement and other investor information are available on the Company’s website at www.endo.com , under “Investors / Media.” 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, a majority of the votes cast at the Annual Meeting will be required in order for:

   

a nominee to be elected as a director;

   

the compensation of the named executive officers to be approved, on a non-binding advisory basis;

   

the Endo International plc Amended and Restated 2015 Stock Incentive Plan to be approved;

   

the Board’s existing authority to issue shares to be renewed; and

   

the appointment of the Company’s independent registered public accounting firm for the year ending December 31, 2020 to be approved and the Board, acting through the Audit Committee, to be authorized to determine the independent registered public accounting firm’s remuneration.

In addition, renewal of the Board’s existing authority to opt-out of statutory pre-emption rights will require the approval of not less than 75% of the votes cast at the Annual Meeting.

The presence of the holders of a majority of the issued and outstanding 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 as follows:

  (1)

FOR each of the nominees for election as director;

  (2)

FOR the approval, on an advisory basis, of the compensation to be paid to the named executive officers;

  (3)

FOR the approval of the Endo International plc Amended and Restated 2015 Stock Incentive Plan;

  (4)

FOR the renewal of the Board’s existing authority to issue shares;

  (5)

FOR the renewal of the Board’s existing authority to opt-out of statutory pre-emption rights; and

  (6)

FOR the approval of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2020 and the authorization of the Board, acting through the Audit Committee, to determine the independent registered public accounting firm’s remuneration.

 

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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 Can 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 Corporate 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

Subject to any restrictions that the Company may be required to implement as a result of public health recommendations related to COVID-19, 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., Dublin, Ireland time, at our registered office at First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

Cost of Proxy Solicitation

The Company will pay any costs incurred associated with preparing, printing and mailing this Proxy Statement and 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 D.F. King & Co., Inc. to assist in soliciting proxies. We will pay D.F. King & Co., Inc. a base fee of approximately $15,000 plus reasonable out-of-pocket expenses for these services.

Presentation of Irish Statutory Financial Statements

The Company’s Irish Statutory Financial Statements for the fiscal year ended December 31, 2019, including the reports of the directors and auditors thereon, will be presented and considered 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 2019 Irish Statutory Financial Statements are expected to become available on or about May 7, 2020 at www.proxyvote.com .

 

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Proposal 1: Election of Directors

The Board of Directors

Under the terms of the Company’s Memorandum and Articles of Association (the Articles of Association), directors need not be shareholders of the Company or residents of Ireland. However, pursuant to the Common Stock Ownership Guidelines (the Ownership Guidelines) approved by the Board, each non-employee director eligible to own Company stock should, but is not required to, have ownership of the Company’s ordinary shares equal in value to at least three times his or her current annual cash retainer to be generally achieved within five years of joining the Board, as further described in the section below entitled “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 generally receive compensation for their services as determined by the Board, as further described in the section entitled “Compensation of Non-Employee Directors.” However, Paul V. Campanelli, who is a non-management director of the Company, will receive compensation in 2020 pursuant to a letter agreement entered into and approved by the Compensation Committee in December 2019, and will not receive non-employee board compensation and/or fees for services as a board member, or for serving as Chairman of the Board, until after his retirement as an employee of the Company on December 31, 2020.

As set forth in the Articles of Association, 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 time by resolution of the Board. 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 General Meeting or his or her earlier death, resignation or removal.

As of December 31, 2019, the Board consisted of six members, including Paul V. Campanelli, Shane M. Cooke, Nancy J. Hutson, Ph.D., Michael Hyatt, Roger H. Kimmel and William P. Montague. Additionally, Mark G. Barberio was appointed to the Board effective February 19, 2020 and Blaise Coleman was appointed to the Board effective March 6, 2020. All of the current members are nominated by the Board for re-election as directors of the Company. The Board has fixed the number of directors at eight.

The Board annually determines the independence of directors based on a review by the Board and the Nominating & Governance Committee. No director is considered independent unless the Board 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’s listing rules. These standards are available on the Company’s website at www.endo.com , under “Investors/Media—Corporate Governance—Nominating & Governance Committee.”

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

The Board has affirmatively determined that all of its current members and nominees, except for Messrs. Campanelli and Coleman, are independent under the Nasdaq’s listing rules. Mr. Campanelli is not independent due to his former role as President and Chief Executive Officer of the Company and Mr. Coleman is not independent due to his role as President and Chief Executive Officer of the Company.

In determining Mr. Cooke’s independence, the Board considered his relationship with Alkermes plc (Alkermes), which has a 2002 license agreement with one of the Company’s subsidiaries with respect to Megace ES ® in the ordinary course of their respective businesses. Mr. Cooke was President of Alkermes until March 2018, when he was appointed to the board of directors of Alkermes. The total amount of royalty and related payments made to Alkermes in 2019 was approximately $0.2 million. The Board also considered Mr. Cooke’s relationship with UDG Healthcare plc (UDG), where he has served as a director since February 2019. The Company’s subsidiaries and UDG are parties to agreements, entered into in the ordinary course of their respective businesses, whereby UDG provides certain services to the Company relating primarily to the packaging, by UDG’s Sharp division, of certain of the Company’s pharmaceutical products. The total amount of payments made to UDG by the Company in 2019 was approximately $6.8 million. The Board has determined that these relationships are not material and do not impair Mr. Cooke’s independence.

In addition, the Board previously had determined that former directors Sharad S. Mansukani, M.D. and Todd B. Sisitsky were independent. It was determined that Dr. Mansukani’s service as an advisor to, and Mr. Sisitsky’s service as an executive of, TPG Capital LP (referred to herein as TPG or TPG Capital), one of Endo’s shareholders during the year ended December 31, 2019, did not interfere with their independence as directors. In determining Dr. Mansukani’s independence, the Board also considered his relationship with Children’s Hospital of Philadelphia (CHOP), to which the Company sells certain sterile injectable products in the ordinary course of their respective businesses. Dr. Mansukani serves as Treasurer and member of the board of trustees of CHOP.

 

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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, except for Messrs. Campanelli and Coleman, all of the directors currently serving are independent and that the members of the Audit, Compensation and Nominating & Governance Committees also meet the applicable independence tests of the Nasdaq listing rules. Specifically, the Nominating & Governance Committee and the Board have determined that, during the last three years, none of the current directors, except for Messrs. Campanelli and Coleman, has had any material relationship with the Company that would compromise independence. The Nominating & Governance Committee recommended this determination to the Board and explained the basis for its recommendation, and this determination was adopted by the full Board.

As of the date of this Proxy Statement, the Company is not aware of any material legal 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.

Nominees

There are eight nominees for election as directors of the Company to serve until the 2021 Annual General Meeting of Shareholders, or until death, resignation or removal, if earlier. All of the nominees are currently serving as directors of the Company. In addition, except for Messrs. Barberio and Coleman, all of the nominees were elected to the Board at the last Annual General Meeting of Shareholders.

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, including experience, skills, expertise, personal and professional integrity, character, business judgment, time availability in

 

Set forth below are summaries of the background, business experience and principal occupation of each of the Company’s current director nominees:

  

light of other commitments, dedication, independence, 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. Although not specified in its charter, the Nominating & Governance Committee also considers diversity, such as ethnicity and gender, when selecting candidates so that additional diversity may be represented on the Board. Our current 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, including extensive experience and knowledge overseeing and counseling management on complex product liability litigation and regulatory compliance matters. The Board believes that each director’s service as chair, vice chair, chief executive officer, chief financial officer and/or senior executive of other significant companies has provided each director with skills that are important to serving on our Board.

 

 

 

 

PAUL V. CAMPANELLI, 58, was appointed Chairman of the Board of Endo in November 2019, concurrently with the announcement of his retirement as President and Chief Executive Officer, effective March 2020. Mr. Campanelli began his service as Director, Chief Executive Officer and President in September 2016. Mr. Campanelli joined Endo in 2015 as the President of Par Pharmaceutical, leading Endo’s fully integrated U.S. Generics business, following Endo’s acquisition of Par Pharmaceutical. Prior to joining Endo, he served as Chief Executive Officer of Par Pharmaceutical Companies, Inc. following the company’s September 2012 acquisition by TPG. Prior to the TPG acquisition, Mr. Campanelli served as Chief Operating Officer and President of Par Pharmaceutical, Inc. from 2010 to 2012. At Par Pharmaceutical Inc., Mr. Campanelli had also served as Senior Vice President, Business

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Development & Licensing; Executive Vice President and President of Par Pharmaceutical, Inc.; and was named a Corporate Officer by its board of directors. He also served on the board of directors of Sky Growth Holdings Corporation from 2012 until 2015. Prior to joining Par Pharmaceutical Companies, Inc., Mr. Campanelli served as Vice President, Business Development at Dr. Reddy’s Laboratories Ltd., where he was employed from 1992 to 2001. He currently serves on the board of directors of Pharmaceutical Associates Inc. Mr. Campanelli earned his Bachelor of Science degree from Springfield College. Mr. Campanelli’s qualifications to serve on the Board of Endo include, among others, his experience in leadership positions at pharmaceutical companies, including the role of chief executive officer, his in-depth knowledge of the pharmaceutical industry, the Company, its businesses and management as well as his judgment and strategic vision.

 

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BLAISE COLEMAN, 46, was appointed Director, President and Chief Executive Officer, effective March 2020. Mr. Coleman served as Executive Vice President and Chief Financial Officer from December 2016 through March 2020 and Interim Chief Financial Officer from November 2016 through December 2016. He joined Endo in January 2015 as Vice President of Corporate Financial Planning & Analysis, and was then promoted to Senior Vice President, Global Finance Operations in November 2015. Prior to joining Endo, Mr. Coleman held numerous finance leadership roles with AstraZeneca, most recently having served as the Chief Financial Officer of the AstraZeneca/Bristol-Myers Squibb US Diabetes Alliance from January 2013 until January 2015. Prior to that, he was the Head of Finance for the AstraZeneca Global Medicines Development organization based in Mölndal, Sweden. Mr. Coleman

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joined AstraZeneca in 2007 as Senior Director Commercial Finance for the US Cardiovascular Business. He joined AstraZeneca from Centocor, a wholly-owned subsidiary of Johnson & Johnson, where he held positions in both the Licenses & Acquisitions and Commercial Finance organizations. Mr. Coleman began his career in public accounting at PricewaterhouseCoopers LLP in 1996 before joining Centocor in 2003. Mr. Coleman is a Certified Public Accountant; he holds a Bachelor of Science degree in accounting from Widener University and an M.B.A. from the Fuqua School of Business at Duke University. Mr. Coleman’s qualifications to serve on the Board of Endo include, among others, his executive leadership experience at pharmaceutical companies, extensive background in finance, business and strategic planning and in-depth knowledge of the Company, its businesses and management.

 

 

MARK G. BARBERIO, 57, was appointed to the Board of Directors in February 2020 and is a member of Endo’s Audit Committee and Nominating & Governance Committee. Mr. Barberio has been a Principal of Markapital, LLC since May 2013. Prior to then, Mr. Barberio held numerous leadership roles at Mark IV, LLC (now Dayco, LLC), most recently having served as a Director from April 2011 to May 2013, Co-Chief Executive Officer from November 2009 to May 2013 and Chief Financial Officer from January 2004 to May 2013. Mr. Barberio currently serves as a Director of Exide Technologies since April 2015 and Gibraltar Industries, Inc. since June 2018 and Life Storage, Inc. since January 2015, where he has been Non-Executive Chairman since May 2018. Previously, Mr. Barberio served as a Director of Paragon Offshore Limited from July 2017 to April 2018. He is also a member of the Rochester Institute of

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Technology Board of Trustees, 100 Club of Buffalo—serving the needs of first responders, Buffalo Angels LLC, WNY Venture Association and Rochester Angel Network and is a member of the National Association of Corporate Directors. He earned an M.B.A. from State University of New York at Buffalo and a B.S. in Business-Accounting from Rochester Institute of Technology. Mr. Barberio’s qualifications to serve on the Board of Endo include, among others, his significant knowledge in strategy development, finance, operational oversight, real estate, capital markets and investor relations stemming from his extensive executive- and board-level experience as chief executive officer, chief financial officer and chairman of the board. Mr. Barberio was identified as a potential candidate by a non-management director and, following an independent third party review process, recommended to the Nominating & Governance Committee and later approved by the Board.

 

 

SHANE M. COOKE, 57, has been a member of the Board of Directors since July 2014 and is Chair of Endo’s Audit Committee and is a member of Endo’s Compliance Committee. In March 2018, Mr. Cooke retired from Alkermes plc (Alkermes), most recently having served as its President since 2011, when Elan Drug Technologies (EDT) merged with Alkermes. Mr. Cooke was appointed to the board of directors of Alkermes in March 2018. From 2007 until 2011, he was head of EDT and Executive Vice President of Elan and concurrently served as Chief Financial Officer of Elan Corporation from 2001 to 2011. Mr. Cooke was appointed director of Elan in 2005. Prior to joining Elan, he was Chief Executive and founder of Pembroke Capital Limited. Mr. Cooke also previously held a number of senior positions in finance in the banking and aviation industries. He currently serves on the boards of directors of

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Alkermes, Prothena Corporation plc and UDG Healthcare plc, which operates through its two divisions: Ashfield and Sharp. Mr. Cooke is a chartered accountant and a graduate of University College Dublin, Ireland. Mr. Cooke’s qualifications to serve on the Board of Endo include, among others, his extensive knowledge of the pharmaceutical industry, significant executive- and board-level experience at a publicly traded company and financial expertise and experience, including service as a chief financial officer of a public company.

 

 

NANCY J. HUTSON, Ph.D., 70, has been a member of the Board of Directors since February 2014 and is Chair of Endo’s Compliance Committee and a member of Endo’s Nominating & Governance Committee. Dr. Hutson retired from Pfizer, Inc. (Pfizer) in 2006 after spending 25 years in various research and leadership positions, most recently having served as Senior Vice President, Pfizer Global Research and Development and Director of Pfizer’s pharmaceutical R&D site, known as Groton/New London Laboratories. At Pfizer, she led 4,500 colleagues (primarily scientists) and managed a budget in excess of $1 billion. She is currently a Director of BioCryst Pharmaceuticals, Inc. and PhaseBio Pharmaceuticals, Inc. Dr. Huston previously served as Director of Cubist Pharmaceuticals until 2015 and Inspire Pharmaceuticals, Inc. until 2011. From 2009 until February 2014, Dr. Hutson was a Director

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of Endo Health Solutions Inc. Dr. Hutson owns and operates Standing Stones Farm in Ledyard, CT. Dr. Hutson holds a Bachelor of Arts degree from Illinois Wesleyan University and a Ph.D. degree from Vanderbilt University. Dr. Hutson’s qualifications to serve on the Board of Endo include, among others, her in-depth knowledge and understanding of the complex research, drug development and business issues facing pharmaceutical companies.

 

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MICHAEL HYATT, 74, has been a member of the Board of Directors since February 2014 and is Chair of Endo’s Nominating & Governance Committee and a member of Endo’s Compensation Committee. Mr. Hyatt has been a Senior Advisor to Irving Place Capital since 2008. Prior to 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. From 2000 until February 2014, Mr. Hyatt was a Director of Endo Health Solutions Inc. Mr. Hyatt holds a Bachelor of Arts degree from Syracuse University and a J.D. degree, from Emory University School of Law. Mr. Hyatt’s qualifications to serve on the Board of Endo include, among others, his leadership experience in the banking industries, in-depth knowledge of the Company and experience as a board member of a publicly traded company.

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ROGER H. KIMMEL, 73, was appointed Senior Independent Director of the Board of Endo in November 2019 and is a member of Endo’s Nominating & Governance Committee, Audit Committee, Compliance Committee and Compensation Committee. Mr. Kimmel previously served as Chairman of the Board of Endo from February 2014 until November 2019. Mr. Kimmel has been Vice Chairman of Rothschild Inc. since January 2001. Previously, Mr. Kimmel was a partner of the law firm Latham & Watkins for more than five years. Mr. Kimmel previously served as a Director of PG&E Corporation and its subsidiary Pacific Gas and Electric Company until January 2019. Mr. Kimmel was a Director of Schiff Nutrition International until 2012, and was a Director and Chairman of Endo Health Solutions Inc. from July 2000 until February 2014. Mr. Kimmel served as Chairman of the Board of Trustees of the University of

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Virginia Law School Foundation (not-for-profit) from January 2009 to June 2015. He has been a public speaker on corporate governance issues and private equity transactions and has been a lecturer at the University of Virginia School of Law since 2017. Mr. Kimmel holds a Bachelor of Arts degree from the George Washington University and a J.D. degree from the University of Virginia School of Law. Mr. Kimmel’s qualifications to serve on the Board of Endo include, among others, his extensive legal and leadership experience, significant experience as a board member of a publicly traded company, corporate governance expertise, investment banking and financial experience and in-depth knowledge about the Company.

 

 

WILLIAM P. MONTAGUE, 73, has been a member of the Board of Directors since February 2014 and is Chair of Endo’s Compensation Committee and a member of Endo’s Audit Committee. Mr. Montague served as Chief Executive Officer of Mark IV Industries, Inc. from 2004 until his retirement in 2008. Mr. Montague also served as a Director of Mark IV Industries, Inc. from 1996 until 2008. He joined Mark IV Industries in 1972 as Treasurer/Controller, serving as Vice President of Finance from 1974 to 1986, then Executive Vice President and Chief Financial Officer from 1986 to 1996 and then as President from 1996 to 2004. Mr. Montague is also a Director of Gibraltar Industries, Inc. since 1993, and has served as Chairman of Gibraltar’s Board of Directors since 2015. From 2013 until 2014, Mr. Montague served as a Director of Allied Motion Technologies Inc. From 2009 until February 2014, Mr. Montague

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was a Director of Endo Health Solutions Inc. Mr. Montague is a Certified Public Accountant; he holds a Bachelor of Science degree in accounting and an M.B.A. from Wilkes University. Mr. Montague’s qualifications to serve on the Board of Endo include, among others, his significant executive and leadership experience at manufacturing companies, including service as chief executive officer and membership on the board of directors of such companies, and financial expertise and experience, including service as a company’s chief financial officer.

Vote Required

Each nominee for director receiving a majority of the votes cast at the Annual Meeting will be elected.

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

Corporate Governance

Board Leadership Structure

We have a board leadership structure under which Mr. Campanelli serves as Chairman of the Board and Mr. Kimmel serves as Senior Independent Director of the Board. The position of Senior Independent Director was created by the Board in April 2018 following the recommendation of the Nominating & Governance Committee to support the Chairman and to provide management and shareholders with additional means of access to the Board. This position was created to align the Company’s board leadership structure with those of other Irish-domiciled companies. Our Board currently has four standing committees. Each committee has a committee chair and each committee consists solely of independent directors. In addition, the Board appoints other committees as the Board considers appropriate or necessary from time to time.

The Board generally believes that the roles of Chairman and Chief Executive Officer should be separate and that the Chairman should not be part of the Company’s management. Accordingly, the roles of Chairman and Chief Executive Officer are filled by Mr. Campanelli and Mr. Coleman, respectively. However, the Board recognizes that under certain circumstances, the Board may determine that it would be in the best interest of the Company if the roles of the Chairman and the Chief Executive Officer are undertaken by the same person, who may not be “independent.” In addition, the Board has determined that in the event the Chairman is not “independent,” the Board shall select a Senior Independent Director. Accordingly, the role of the Senior Independent Director is filled by Mr. Kimmel.

 

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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 chair, vice chair, chief executive officer, chief financial officer and/or senior executive of other significant 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 addition to the general duties and responsibilities of a director, in accordance with the Articles of Association and our corporate governance guidelines, the Chairman is responsible for setting Board meeting agendas, dates and locations, presiding over all Board and shareholder meetings, presiding over all executive sessions of the Board, if independent, meeting regularly with the Chief Executive Officer between Board meetings and facilitating full and candid communication among directors and between the Board and the Chief Executive Officer. In addition to the general duties and responsibilities of a director, in accordance with our corporate governance guidelines, the Senior Independent Director is responsible for fulfilling the Chairman’s duties, as described above, in the event that the Chairman is unavailable or unable to fulfill the Chairman’s duties, including presiding over executive sessions of the Board, together with assisting the Chairman and the chair of the Nominating & Governance Committee with board evaluation, acting as a liaison with specified industry groups designated by the Board or the Chief Executive Officer at their direction, supporting the Chairman and providing management and shareholders with additional means of access to the Board and acting as an intermediary for other directors, if necessary or appropriate. 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 with oversight of company operations, coupled with a seasoned Board that includes an accomplished and knowledgeable Board Chairman, Senior Independent Director, other independent directors and separate independent committee chairs, is the appropriate leadership structure for Endo.

Board Responsibilities

The Board is responsible for overseeing and advising management with respect to the long-term interests of the Company and its shareholders. The Board’s responsibilities include, among others, the following:

   

overseeing management’s conduct of our business;

   

reviewing and overseeing the Company’s risk management efforts;

   

determining the compensation of our President and Chief Executive Officer;

   

planning for CEO succession;

   

reviewing the Company’s human capital management efforts, including broad oversight of compensation programs, succession planning and leadership development;

   

reviewing and approving our major financial objectives, strategic priorities and operating plans;

   

reviewing and evaluating the Company’s financial reporting processes; and

   

reviewing regulatory, compliance, quality and legal matters and management’s implementation of the Company’s compliance program.

To address these responsibilities, the Board and its committees meet on at least quarterly basis with members of management, including at regularly scheduled Board and committee meetings, and participate in recurring informational calls and other ad hoc discussions with management that generally occur at least quarterly. Additional information is included throughout the remainder of this section and under the heading “Board Meetings, Attendance and Committees of the Board of Directors” below.

Risk Oversight

On a regular basis, the Company’s officers responsible for monitoring and managing risks across the Company’s various functions and business segments make reports to the Audit Committee. The Audit Committee, in turn, reports to the full Board of Directors. 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 Endo officers as the Board may deem appropriate. In addition, each of our Board committees considers the risks within its respective areas of responsibility.

The Board believes that one of its most important responsibilities is to oversee how the Company’s Executive Leadership Team, which includes our current named executive officers (NEOs) and other senior leaders, manages the various risks the Company faces and has delegated primary responsibility for overseeing the Company’s Enterprise Risk Management (ERM) program to the Audit Committee. It is management’s responsibility to manage risk and bring the most material risks the Company faces to the attention of the Audit Committee and the Board. The Company’s head of internal audit, who reports functionally to the Audit Committee, facilitates the ERM program under the sponsorship of our Executive Leadership Team. Enterprise risks are identified and prioritized by management, and each material 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 program.

 

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The Audit Committee regularly reviews, in consultation with third party advisors as appropriate, risks and risk management activities relating to liquidity, debt, financial, accounting, legal, tax, compliance, information technology security and other matters. 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, succession planning and leadership development. The Compensation Committee also reviews compensation and benefit plans affecting Endo’s executive officers and other employees. The full Board considers strategic risks and opportunities and regularly receives reports from its committees regarding risk oversight in their respective areas of responsibility.

Code of Conduct

The Board has adopted a Code of Conduct that applies to the Company’s directors, executive officers (including its President and Chief Executive Officer and Executive Vice President and Chief Financial Officer) and other employees (Endo Code). The Board has also adopted a Code of Conduct for the Board of Directors (Director Code). These Codes are posted on the Company’s website at www.endo.com . The Endo Code is available under “Our Responsibility—Corporate Compliance—Code of Conduct,” and the Director Code is available under “Investors/Media—Corporate Governance—Code of Conduct.” Any waiver of either code for a director or executive officer of the Company, as applicable, may be made only by the Board or a committee of the Board. Such waivers and any amendments to either code will be disclosed on the Company’s website if required by law or stock exchange rules.

Recovery of Compensation

The Compensation Committee maintains a compensation recovery policy relating to recoupment of cash and equity-based incentive awards (collectively, Covered Awards) granted to NEOs and other senior management employees at the vice president level and above (collectively, Covered Employees). Under the policy, if the Company issues a material restatement of its reported financial results caused by the Covered Employee’s fraud or intentional misconduct, as determined by the Compensation Committee, then the Compensation Committee will direct the Company to use reasonable efforts to seek recovery of all Covered Awards that were paid or granted for performance during the restated fiscal year or years. In addition, the Compensation Committee has the ability to recoup certain Covered Awards granted to Covered Employees for material misconduct or gross negligence resulting in a material violation of the Company’s policies or applicable laws, as determined by a court of competent jurisdiction in a final, non-appealable judgment, which causes material financial harm to the Company. In the event that the Compensation Committee invokes this policy to recover any Covered Awards, the Company will disclose such recoupment as required by law or regulation or if the applicable misconduct has otherwise become public knowledge.

Insider Trading Policy

The Board 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 puts, calls 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.

Company Policy on Parachute Payments

The Board has 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. 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 Code). Accordingly, the Company does not have any employment agreements with change in control excise tax gross up provisions.

Common Stock Ownership Guidelines

The Board has adopted 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/Media—Corporate Governance—Nominating & Governance Committee.” The current Ownership Guidelines provide that each non-employee director eligible to own Company stock should, but is not required to, have ownership of the Company’s ordinary shares equal in value to at least three times his or her current annual cash retainer to be generally achieved within five years of joining the Board. All non-employee directors and NEOs subject to the Ownership Guidelines are in compliance with the recommended guidelines.

Review and Approval of Transactions with Related Persons

The Board 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 beneficial owners of

 

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greater than five percent of the Company’s outstanding ordinary shares). The policy covers any related person transaction that meets the minimum threshold for disclosure in the Proxy Statement under relevant SEC rules (generally, transactions involving amounts exceeding $120,000 in which a related person has a direct or indirect material interest). Such transactions are subject to review and approval by the Audit Committee.

Robert Campanelli is the Executive Director, Strategic Operations at Par Pharmaceutical, Inc., a subsidiary of the Company. Mr. Campanelli joined Par Pharmaceutical Inc. in 2003 as a senior product manager and has worked in ascending areas of responsibility since that time. He is the brother of Paul Campanelli, Chairman of the Board. Robert Campanelli’s 2019 compensation, calculated in accordance with the rules applicable to the Summary Compensation Table, totaled $414,344, of which $229,820 was salary, $121,930 was annual and other bonuses and $62,594 was compensation under the Company’s long-term incentive equity plan. In addition, Robert Campanelli is also eligible to participate in the retirement plans, insurance programs, health benefits and other similar employee welfare benefit arrangements available to other employees of comparable level and on substantially similar terms and conditions.

Shareholder Interaction

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, including the Chairman or the Senior Independent Director, any Board committee or the chair of any such committee by mail. To communicate with the Board, 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 Corporate 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 Corporate 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(s). In the case of communications to the Board or any group or committee of directors, the Corporate 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 communication is addressed.

Shareholder Engagement

Endo’s Board believes it is important to directly engage with shareholders, including targeted outreach initiatives as a means of soliciting their views on matters, including governance, environmental, social, executive compensation and other important topics, in order to assist our Board with items requiring a broader shareholder perspective. Over the past several years, certain independent directors and members of our management team have engaged with our shareholders, as well as with third party advisory firms to discuss key issues on a variety of topics. In addition to the shareholder advisory vote on executive compensation (the say-on-pay vote), these conversations have provided the Board with insights into evolving shareholder views, while serving as an effective communication channel for matters of critical importance to Endo’s short- and long-term priorities. Members of Endo’s Board, including independent directors, plan to continue efforts to engage with and maintain an open dialogue with shareholders.

In 2019, the Company continued efforts to engage with shareholders, following 2018 discussions with shareholders, as well as ISS and Glass Lewis. The 2018 conversations resulted in changes being implemented by the Compensation Committee in 2019, including:

   

Placing more emphasis on performance-based equity for NEOs in the form of 50% Performance Share Units (PSUs) and 50% Restricted Stock Units (RSUs), representing an increase in the proportion of PSUs compared to 2018

   

Increasing the length of the PSU performance period by introducing an Adjusted Free Cash Flow (FCF) metric measured over a single three-year period, compared to three one-year periods prior to 2019, in addition to relative Total Shareholder Return (TSR) measured over a three-year period

   

No longer authorizing special or off-cycle LTI grants for NEOs, except for new hire and promotion situations

Following the implementation of these changes, the Company’s 2019 shareholder engagement process resulted in the following feedback:

   

A high degree of support for the Company’s responsiveness to shareholder concerns raised in 2018 and agreement with the resulting changes implemented by the Compensation Committee

   

Continued support for the Company’s strategy, performance and management, as well as Endo’s executive compensation policies, plan designs and metrics used

   

Significant shareholder focus on Endo motivating top talent with an emphasis on encouraging management continuity during a period of significant external headwinds facing Endo and other specialty pharmaceutical companies

   

Support for the Company’s proactive management of share utilization, and emphasis on minimizing shareholder dilution levels

The feedback received from shareholders relating to encouraging management continuity as well as the Company’s stock utilization limitations are material concerns also shared by the Board. For Endo employees, including the Company’s NEOs, significant realized value opportunities have been lost over the past several years due to external factors outside of the

 

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employees’ control, including unfavorable media coverage and political scrutiny and litigation relating to prescription opioid medication abuse. The negative impact these factors had on Endo’s share price created significant continuity risk and share usage concerns for the Company that required immediate attention.

The actions implemented by the Compensation Committee as a result of this feedback were intended to directly address these concerns. First, continuity compensation arrangements were authorized by the Compensation Committee to increase realizable earnings for Endo’s most critical talent in an effort to help bridge the gap between current pay and competitive norms. In addition, the use of cash-based long-term incentives in 2020 was also authorized to address shareholder concerns regarding share usage and dilution resulting from Endo’s reduced share price, but also to serve as a separate mechanism to allow for predictable realizable value opportunities for all LTI-eligible employees. Both actions were required to maintain management continuity and increase the level of motivation for Endo employees, which in turn are key to driving the success of the business on an ongoing basis. The changes implemented as a result of the feedback received in 2019 are discussed further under “Executive Summary” in the CD&A section of this Proxy Statement.

Board Meetings, Attendance and Committees of the Board of Directors

Between January 1, 2019 and December 31, 2019, the Board as a whole met five times and acted by written consent on one occasion. All members of the Board attended 75% or more of the aggregate number of meetings of the Board and of the committees of the Board on which they served in 2019 (that were held during the respective periods in which they served on the Board and related committees). The Board’s committees also routinely engage with members of management outside of these scheduled meetings, including their participation in recurring informational calls that generally occur at least quarterly and other ad hoc discussions. The Company does not have a policy on director attendance at Annual Meetings. Messrs. Kimmel and Cooke and Dr. Mansukani attended the 2019 Annual General Meeting of Shareholders (the 2019 Annual Meeting).

The Board has a standing Audit Committee, Compensation Committee, Nominating & Governance Committee and Compliance Committee. The Board has determined that each committee’s chair and members, both current and expected, are “independent” in accordance with the criteria established by the SEC and Nasdaq. Each of these committees operates pursuant to a written charter adopted by the Board describing the nature and scope of responsibilities of each committee.

Audit Committee

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

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, and expressing an opinion on, the conformity of the Company’s financial statements with accounting principles generally accepted in the United States and the effectiveness of the Company’s internal controls over financial reporting.

Between January 1, 2019 and December 31, 2019, the Audit Committee met four times, in each case including periodic meetings held separately with management, the Company’s internal auditors and the independent registered public accounting firm.

Compensation Committee

The Compensation Committee of the Board determines the salary and incentive compensation of our President and Chief Executive Officer, reviews and approves the compensation levels of certain other senior executives of the Company, including the NEOs, and provides broad guidance regarding the remuneration and incentive compensation of the other employees of the Company. The Compensation Committee also reviews all the recommendations of the Company’s management for awards granted under the Endo International plc Amended and Restated 2015 Stock Incentive Plan and acts on such recommendations, as appropriate, in the Committee’s judgment. The Compensation Committee’s charter is available on the Company’s website at www.endo.com , under “Investors/Media—Corporate Governance—Compensation Committee.”

The primary function of the Compensation Committee is to set and review 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 NEOs, including the President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and those other individuals included in the Summary Compensation Table, is competitive and performance-based. Responsibilities of the Compensation Committee include, but are not limited to:

   

setting and reviewing, at least annually, the goals and objectives of the Company’s executive compensation plans;

   

annually evaluating the performances of the Company’s NEOs (and certain other employees) in light of those goals and objectives and determining and/or approving their compensation levels based on such evaluations;

 

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establishing or reviewing performance-based and Long-Term Incentive (LTI) plans for the NEOs (and certain other employees), as well as reviewing and approving other supplemental benefits and perquisites for such NEOs (and certain other employees);

   

interpreting, implementing, administering, reviewing and approving all other aspects of remuneration to the Company’s NEOs (and certain other employees), including their employment agreements, severance arrangements and change in control agreements or provisions;

   

developing, approving, administering and recommending to the Board and the Company’s shareholders for their approval (to the extent such approval is required by any applicable law, regulation or Nasdaq rule) all stock option and other stock incentive plans of the Company and all related policies and programs;

   

approving individual recommendations and granting any shares, stock options, cash-based awards or other equity-based awards under all long-term stock incentive plans that are outside approved guidelines for such grants, and exercising such power and authority as may be required or permitted under such plans;

   

reviewing and approving the Company’s management succession plan for senior management; and

   

reviewing and approving compensation policies for the Company’s non-employee directors.

Endo management provides reviews and recommendations of the Company’s executive compensation programs, policies and governance for the Compensation Committee’s consideration and review. Management 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.

Between January 1, 2019 and December 31, 2019, the Compensation Committee met five times.

Use of Compensation Consultants . The Compensation Committee retains Korn Ferry as its consultant to provide objective, independent analysis, advice and recommendations with regard to executive and employee compensation including, but not limited to, competitive market data, compensation analysis and recommendations related to our President and Chief Executive Officer, Board and our other senior executives. Korn Ferry served as the independent executive compensation consultant to the Compensation Committee for the Company’s entire 2019 fiscal year. The consultant reports to the Chair of the Compensation Committee and has direct access to the other members of the Compensation Committee. The Compensation Committee also authorizes the consultant to interact with management in certain respects 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 Korn Ferry attends meetings of the Compensation Committee, is available to participate in executive sessions and communicates directly with the Compensation Committee.

In determining the independence and lack of any conflict of interest regarding Korn Ferry and Korn Ferry’s lead advisor to the Compensation Committee, the Compensation Committee considered, among other things, the following factors:

   

the amount of Korn Ferry’s fees for executive compensation consulting services, noting in particular that such fees are nominal when considered in the context of Korn Ferry International and Korn Ferry’s total revenues for the period;

   

Korn Ferry’s policies and procedures concerning conflicts of interest (copies of which were made available to the Compensation Committee);

   

that there are no conflicts of interest resulting from other business or personal relationships between Korn Ferry’s lead advisor to the Compensation Committee and any members of the Compensation Committee or the Company’s executive team;

   

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

   

any other factors relevant to the independence of Korn Ferry.

In addition, Korn Ferry’s Policy on Avoiding Conflicts of Interest confirms that Korn Ferry’s compensation consultants will continue to provide clients with independent, unbiased advice. Endo’s Board determined that the policy sufficiently allows Korn Ferry Compensation Committee consultants to maintain independence.

In 2019, Korn Ferry assisted the Compensation Committee with, among other things, (i) performing a review of the Company’s executive and Board compensation programs, including competitive market analyses, assessment of potential risks associated with compensation arrangements, policies and plans and considerations related to Endo’s President and Chief Executive Officer and 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 CD&A) for purposes of benchmarking the Company’s executive com-

 

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pensation 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.

Compensation Committee Interlocks and Insider Participation . As of the date of this Proxy Statement and during 2019, (i) none of the members of the Compensation Committee were or have been officers or employees of the Company or had or have had any relationship requiring disclosure under Item 404(a) of Regulation S-K and (ii) none of the executive officers of the Company served or have served on the compensation committee or board of any company that employed any member of the Company’s Compensation Committee or Board.

Nominating & Governance Committee

The Nominating & Governance Committee of the Board, which consists 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’s charter is available on the Company’s website at www.endo.com , under “Investors/Media—Corporate Governance—Nominating & Governance Committee.”

While the Board does not have a formal policy with respect to diversity, the Board 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 backgrounds. The Nominating & Governance Committee considers a broad array of qualifications and attributes including: experience, skills, expertise, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, independence and such other relevant factors that the Nominating & Governance Committee considers appropriate in the context of the needs of the Board. Although not specified in its charter, the Nominating & Governance Committee also considers diversity, such as ethnicity and gender, when selecting candidates so that additional diversity may be represented on the Board.

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:

   

Shareholder Information: name of the shareholder and evidence of share ownership in the Company, including the quantity owned and the length of time of ownership.

   

Candidate Information: name of the candidate, his or her resume or a listing of qualifications to be a director of the Company and his or her 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 Corporate Secretary at Endo International plc, First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

The Nominating & Governance Committee will also, from time to time, engage national search firms that specialize in identifying and evaluating director candidates.

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 Chair 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 on 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 the number of shares held by the recommending shareholder and the length of time that such shares have been held may be taken into consideration.

The Nominating & Governance Committee has established procedures under which any director who is not elected shall tender his or her resignation to the Board.

Between January 1, 2019 and December 31, 2019, the Nominating & Governance Committee met five times.

Compliance Committee

The Compliance Committee focuses on assisting the Board by providing oversight of regulatory, compliance, quality and legal matters and reviewing management’s implementation of the Company’s compliance program. The Compliance Committee’s charter is available on the Company’s website at www.endo.com , under “Investors/Media—Corporate Governance—Compliance Committee.”

 

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Between January 1, 2019 and December 31, 2019, the Compliance Committee met four times.

Composition of Committees of the Board of Directors

The following table shows the directors who currently serve on and/or chair each of the current committees.

 

   Name   Audit Committee     Compensation
Committee
    Nominating &
Governance
Committee
    Compliance
Committee
 

Paul V. Campanelli

 

 

 

 

 

 

 

 

 

 

 

 

Blaise Coleman

 

 

 

 

 

 

 

 

 

 

 

 

Mark G. Barberio

 

 

Member

 

 

 

 

 

 

Member

 

 

 

 

Shane M. Cooke

 

 

Chair

 

 

 

 

 

 

 

 

 

Member

 

Nancy J. Hutson, Ph.D.

 

 

 

 

 

 

 

 

Member

 

 

 

Chair

 

Michael Hyatt

 

 

 

 

 

Member

 

 

 

Chair

 

 

 

 

Roger H. Kimmel

 

 

Member

 

 

 

Member

 

 

 

Member

 

 

 

Member

 

William P. Montague

 

 

Member

 

 

 

Chair

 

 

 

 

 

 

 

With respect to the Audit Committee, the Board has determined that: (i) Messrs. Barberio, Cooke and Montague are “audit committee financial experts,” as defined by the SEC regulations, and each has the related financial management expertise within the meaning of the Nasdaq listing rules and (ii) the current and expected chair and members are financially literate in accordance with the criteria established by the SEC and the Nasdaq.

 

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Security Ownership of Certain Beneficial Owners and Management

The following table, together with the corresponding footnotes, sets forth, as of April 13, 2020, the name, address and holdings of each person, including any “group” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the Exchange Act), known by Endo to be the “beneficial owner” of more than 5% of the Company’s outstanding ordinary shares. The table also sets forth, as of April 13, 2020, the number of ordinary shares beneficially owned by each of the Company’s current directors and NEOs, and by all current directors and executive officers of the Company as a group. Footnote (1) below provides a brief explanation of what is meant by the term “beneficial ownership.”

 

   Name of Beneficial Owner    Number of
Ordinary Shares
Beneficially
Owned (#)(1)
    

Percentage

of Class (%)(1)

 
   Directors and Named Executive Officers:  

Paul V. Campanelli(2)

     2,631,805        1.1%  

Blaise Coleman(2)

     440,538        *  

Shane M. Cooke(2)

     82,074        *  

Nancy J. Hutson, Ph.D.(2)

     77,953        *  

Michael Hyatt(3)

     317,373        *  

Roger H. Kimmel(4)

     203,309        *  

William P. Montague(2)

     92,871        *  

Terrance J. Coughlin(2)

     639,000        *  

Matthew J. Maletta(2)

     460,457        *  

Patrick Barry(2)

     169,129        *  

All current directors and executive officers of the Company as a group (14 persons)

     5,342,008        2.3%  
   Other Shareholders:  

BlackRock, Inc.(5)

     35,263,079        15.4%  

The Vanguard Group, Inc.(6)

     29,969,156        13.0%  

Glenview Capital Management, LLC(7)

     18,470,405        8.0%  

Renaissance Technologies LLC(8)

     16,283,700        7.1%  

Miller Value Partners, LLC(9)

     15,571,495        6.8%  

 

*

The percentage represents less than 1%.

 

(1)

“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 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. The amounts in this table do not reflect future grants. Beneficial ownership for the directors and NEOs included in the table above is summarized as follows:

 

   Name   Ordinary Shares (a)     Options to Purchase 
Ordinary Shares That 
Will Be Exercisable 
within the Next 60 Days 
 

Paul V. Campanelli

    1,074,985       1,556,820   

Blaise Coleman

    185,815       254,723   

Shane M. Cooke

    82,074       —   

Nancy J. Hutson, Ph.D.

    77,953       —   

Michael Hyatt

    317,373       —   

Roger H. Kimmel

    203,309       —   

William P. Montague

    92,871       —   

Terrance J. Coughlin

    337,507       301,493   

Matthew J. Maletta

    182,700       277,757   

Patrick Barry

    88,077       81,052   

 

  (a)

The ordinary share amounts for Mr. Kimmel include 80,000 shares held in trusts for which he has shared voting power and shared disposition power. Excluding these amounts, the owners listed above have sole voting power and sole disposition power with respect to their ordinary shares.

 

(2)

The business address for this person is c/o Endo International plc, First Floor, Minerva House, Simmonscourt Road, Ballsbridge, Dublin 4, Ireland.

(3)

The business address for Mr. Hyatt is c/o Irving Place Capital, 745 Fifth Avenue, 7th Floor, New York, New York 10151.

(4)

The business address for Mr. Kimmel is c/o Rothschild & Co. US Inc., 1251 Avenue of the Americas, New York, New York 10020.

 

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(5)

The business address for this entity is 55 East 52nd Street, New York, New York 10055. BlackRock, Inc. has sole power to (i) vote 34,637,036 ordinary shares and (ii) dispose 35,263,079 ordinary shares. This ownership information is based on a Schedule 13G/A filed with the SEC on February 4, 2020 by BlackRock, Inc.

(6)

The business address for this entity is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The Vanguard Group, Inc. has sole power to (i) vote 224,244 ordinary shares and (ii) dispose 29,747,341 ordinary shares and shared power to (i) vote 25,600 ordinary shares and (ii) dispose 221,815 ordinary shares. This ownership information is based on a Schedule 13G/A filed with the SEC on February 11, 2020 by The Vanguard Group, Inc.

(7)

The business address for this entity is 767 Fifth Avenue, 44th Floor, New York, New York 10153. Glenview Capital Management, LLC has shared power to (i) vote 18,470,405 ordinary shares and (ii) dispose 18,470,405 ordinary shares. This ownership information is based on a Schedule 13G/A filed with the SEC on February 14, 2020 by Glenview Capital Management, LLC.

(8)

The business address for this entity is 800 Third Avenue, New York, New York 10022. Renaissance Technologies LLC has sole power to (i) vote 16,283,700 ordinary shares and (ii) dispose 16,283,700 ordinary shares. This ownership information is based on a Schedule 13G/A filed with the SEC on February 13, 2020 by Renaissance Technologies LLC.

(9)

The business address for this entity is One South Street, Suite 2550, Baltimore, MD 21202. Miller Value Partners, LLC has shared power to (i) vote 15,571,495 ordinary shares and (ii) dispose 15,571,495 ordinary shares. This ownership information is based on a Schedule 13G filed with the SEC on February 14, 2020 by Miller Value Partners, LLC.

Compensation of Non-Employee Directors

The Compensation Committee annually reviews compensation for each non-employee director against pay levels among Endo’s Pay Comparator Companies and makes adjustments, as appropriate. The Company offers a compensation package below median pay levels exhibited by Endo’s Pay Comparator Companies. This compensation package is designed to award a meaningful portion of compensation in the form of equity to further align the interests of non-employee directors with the interests of Endo shareholders while managing shareholder dilution levels. Except as described below under the heading “Non-Employee Director Compensation Table,” directors who are employees of the Company generally receive no additional compensation for their services as directors or as members of Board committees. Details on the compensation arrangements for Endo’s non-employee directors are summarized below under the headings “Annual Cash Retainer” and “Annual Equity Retainer.”

In October 2019, the Compensation Committee approved the following changes to the compensation of non-employee directors, effective for the 2020 compensation cycle:

   

Updating the annual Board cash and equity retainer fees from cash of $60,000 and equity of $240,000 to cash and equity of $175,000 each

   

Increasing the annual committee chair retainers for the Compensation Committee and Nominating & Governance Committee from $20,000 to $25,000 and from $15,000 to $20,000, respectively

   

Introducing an annual cash retainer of $15,000 for all members of each committee

The compensation cycle for non-employee directors runs from January 1st through December 31st of each year, with the annual payment date scheduled for the first trading day following the Annual General Meeting of Shareholders. The current compensation package for non-employee directors, which reflects the most recent changes implemented in 2019, is further described below.

Annual Cash Retainer

Non-employee directors are entitled to receive an annual cash retainer based on their service on the Board, as well as for their roles on certain committees of the Board. The amounts that non-employee directors were entitled to receive in June 2019 and will be entitled to receive in June 2020, which reflect the changes to the director pay program noted above, are set forth in the following schedule:

 

   Purpose   Paid in June 2019     To Be Paid in June
2020 (1)
 

For membership on the Board of Directors

  $ 60,000     $         175,000  

For serving as the Chairman of the Board of Directors

  $                 150,000     $ 150,000  

For serving as Senior Independent Director

  $ 60,000     $ 60,000  

For serving as Chair of the Audit Committee

  $ 25,000     $ 25,000  

For serving as Chair of the Compensation Committee

  $ 20,000     $ 25,000  

For serving as Chair of the Compliance Committee

  $ 20,000     $ 20,000  

For serving as Chair of the Nominating & Governance Committee

  $ 15,000     $ 20,000  

For membership on any of the Board’s committees (on a committee-by-committee basis)

    n/a     $ 15,000  

 

(1)

Paul V. Campanelli, who is a non-management director of the Company, will receive compensation in 2020 pursuant to a letter agreement entered into and approved by the Compensation Committee in December 2019, and will not receive non-employee board compensation and/or fees for services as a board member, or for serving as Chairman of the Board, until after his retirement as an employee of the Company on December 31, 2020.

 

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Meeting Fees

Non-employee directors are entitled to receive a fee of $5,000 cash per trip to Ireland on Company business, other than for attending regularly scheduled meetings in Ireland.

Annual Equity Retainer

Effective with the 2020 compensation cycle, each non-employee director is entitled to receive an annual award of fully-vested ordinary shares having a grant date value equal to $175,000, which is reduced from the grant date value of annual awards granted during the 2019 compensation cycle of $240,000. The number of ordinary shares actually awarded to each non-employee director is calculated using a determined grant date fair market value (as determined in the sole discretion of the Compensation Committee, but in no event shall the determined grant date fair market value be less than the closing price as of the date of the grant). Establishing the closing price as of the date of the annual grant as a base metric limits additional shares being issued beyond the number of shares that would have been issued based on the closing price on the date of grant. In acknowledgment of the Company’s share utilization priorities and applicable plan limits, all or a portion of the annual equity retainer may be issued in the form of cash, subject to the Compensation Committee’s discretion. Consistent with past practices, the annual stock award grant date for non-employee directors is on the first trading day after the Company’s Annual General Meeting of Shareholders, with the annual stock award for the 2020 compensation cycle scheduled for grant on June 12, 2020. Pursuant to the Directors Stock Election Plan (described below), non-employee directors may also elect to receive their cash retainer fees in the form of Endo ordinary shares.

Directors Stock Election Plan

Under the Directors Stock Election Plan, non-employee directors may elect to have some or all of their cash 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 grant date fair market value (as described above) on the day the payment would have otherwise been paid in cash.

Additional Arrangements

The Company provides Irish tax return preparation services for certain non-employee directors and 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-employee directors and officers individually.

Non-Employee Director Compensation Table

The following table provides information concerning the compensation of the Company’s non-employee directors paid during 2019 and includes any individual who served as a non-employee director of the Company at any time during 2019. Other than as described below, directors who were employees of the Company at any time during 2019 received no additional compensation for their services as directors or as members of Board committees. During the 2020 compensation cycle, Mr. Campanelli will receive certain compensation and benefits in respect of his combined service as Chairman of the Board and as an employee supporting an orderly succession plan and transitional process through December 31, 2020, as described below under the heading “CEO Performance & Compensation Determination Summary.” 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 ($)
    Total ($)  

Shane M. Cooke

    5 Years 6 Months     $ 85,000     $         240,000     $                            —     $   325,000  

Nancy J. Hutson, Ph.D.

    6 Years     $ 80,000     $ 240,000     $     $ 320,000  

Michael Hyatt

    6 Years     $ 75,000     $ 240,000     $     $ 315,000  

Roger H. Kimmel

    6 Years     $               210,000     $ 240,000     $     $ 450,000  

Sharad S. Mansukani, M.D.

    2 Years     $ 125,000     $ 240,000     $     $ 365,000  

William P. Montague

    6 Years     $ 80,000     $ 240,000     $     $ 320,000  

Todd B. Sisitsky

    3 Years     $     $     $     $  

 

(1)

The amounts in this column include all fees earned by each non-employee director during the 2019 compensation cycle. Dr. Mansukani was a director until November 4, 2019. Mr. Sisitsky was a director until June 11, 2019. Because Mr. Sisitsky also served as a representative of TPG Capital, whose policies prohibited personal ownership of company stock by its representatives, Mr. Sisitsky had waived all rights to receive any cash or share-based compensation during 2019.

 

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(2)

The amounts shown in this column represent the grant date fair value for each non-employee director’s share-based awards under A ccounting Standard Codification Topic 718—Stock Compensatio n (ASC 718). The stock awards reflect compensation for annual services. Refer to the “Share-Based Compensation” footnote in our audited financial statements included in the Endo International plc 2019 Annual Report on Form 10-K for the assumptions we used in valuing and expensing stock awards in accordance with ASC 718. The grant date fair value of each stock award granted in 2019, computed in accordance with ASC 718, is as follows:

 

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

Shane M. Cooke

    June 12, 2019     $             240,000  

Nancy J. Hutson, Ph.D.

    June 12, 2019     $ 240,000  

Michael Hyatt

    June 12, 2019     $ 240,000  

Roger H. Kimmel

    June 12, 2019     $ 240,000  

Sharad S. Mansukani, M.D.

    June 12, 2019     $ 240,000  

William P. Montague

    June 12, 2019     $ 240,000  

Todd B. Sisitsky

    n/a     $  

 

(3)

The following table summarizes the number of stock options and RSUs outstanding and exercisable at December 31, 2019 for each non-employee director serving on the Board at December 31, 2019:

 

                                           
   
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)  
 

Shane M. Cooke

                    $  

Nancy J. Hutson, Ph.D.

                            8,094                           8,094       6,515     $ 30,555  

Michael Hyatt

    8,094       8,094           $  

Roger H. Kimmel

    8,094       8,094       15,074     $ 70,697  

William P. Montague

    8,094       8,094                              23,108     $                 108,377  

 

  (a)

Based upon the closing price on December 31, 2019 of $4.69. Includes all RSUs and any outstanding options as of December 31, 2019, for which the exercise price is equal to or less than $4.69 per share.

 

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Proposal 2: Advisory Vote on the Compensation of Our Named Executive Officers (Say-on-Pay)

We are seeking an advisory vote to approve our executive compensation for 2019. At our 2017 Annual General Meeting of Shareholders, a majority of shareholders voted to have a say-on-pay vote each year. As a result, on August 1, 2017, the Compensation Committee resolved that Endo will conduct an advisory vote on executive compensation annually at least until the next shareholder advisory vote on the frequency of such votes, which is scheduled to occur no later than June 2023.

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

Although the say-on-pay vote is advisory and is not binding on our Board, our Compensation Committee will take into consideration the outcome of the vote when making future executive compensation decisions. At the 2019 Annual Meeting, approximately 95.5% of the votes cast favored our say-on-pay proposal.

In 2019, Mr. Montague, who serves as our Chair of the Compensation Committee, and certain members of our management team undertook efforts to engage with shareholders and reached out to holders of approximately 88% of Endo’s ordinary shares outstanding, following 2018 discussions with shareholders, as well as ISS and Glass Lewis. The 2018 conversations resulted in changes being implemented by the Compensation Committee in 2019, including:

   

Placing more emphasis on performance-based equity for NEOs in the form of 50% PSUs and 50% RSUs, representing an increase in the proportion of PSUs compared to 2018

   

Increasing the length of the PSU performance period by introducing an FCF metric measured over a single three-year period, compared to three one-year periods prior to 2019, in addition to relative TSR measured over a three-year period

   

No longer authorizing special or off-cycle LTI grants for NEOs, except for new hire and promotion situations

Following the implementation of these changes, the Company’s 2019 shareholder engagement process resulted in the following feedback:

   

A high degree of support for the Company’s responsiveness to shareholder concerns raised in 2018 and agreement with the resulting changes implemented by the Compensation Committee

   

Continued support for the Company’s strategy, performance and management, as well as Endo’s executive compensation policies, plan designs and metrics used

   

Significant shareholder focus on Endo motivating top talent with an emphasis on encouraging management continuity during a period of significant external headwinds facing Endo and other specialty pharmaceutical companies

   

Support for the Company’s proactive management of share utilization, and emphasis on minimizing shareholder dilution levels

The feedback received from shareholders relating to encouraging management continuity as well as the Company’s stock utilization limitations are material concerns also shared by the Board. For Endo employees, including the Company’s NEOs, significant realized value opportunities have been lost over the past several years due to external factors outside of the employees’ control, including unfavorable media coverage and political scrutiny and litigation relating to prescription opioid medication abuse. The negative impact these factors had on Endo’s share price created significant continuity risk and share usage concerns for the Company that required immediate attention.

The actions implemented by the Compensation Committee as a result of this feedback were intended to directly address these concerns. First, continuity compensation arrangements were authorized by the Compensation Committee to increase realizable earnings for Endo’s most critical talent in an effort to help bridge the gap between current pay and competitive norms. In addition, the use of cash-based long-term incentives in 2020 was also authorized to address shareholder concerns regarding share usage and dilution resulting from Endo’s reduced share price, but also to serve as a separate mechanism to allow for predictable realizable value opportunities for all LTI-eligible employees. Both actions were required to maintain management continuity and increase the level of motivation for Endo employees, which in turn are key to driving the success of the business on an ongoing basis. The shareholder engagement process and resulting changes implemented as a result of the feedback received in 2019 are discussed further under the heading “Say-on-Pay and Shareholder Engagement Feedback” within the CD&A section.

As shareholders consider this year’s advisory vote, the CD&A section of this year’s proxy statement also provides detailed information on the CEO compensation arrangement for Blaise Coleman, as well as actions taken by the Company to focus on encouraging management continuity during a period of significant external challenges. In conjunction with the CEO transition arrangements implemented by the Compensation Committee, the actions described in the CD&A were intended to minimize the level of disruption for the Company, while maintaining continued focus on the Company’s vision, objectives and strategic priorities, as well as alignment with shareholder interests.

 

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Vote Required

A majority of the votes cast at the Annual Meeting will be required to approve, on an advisory basis, the compensation of Endo’s named executive officers.

The Compensation Committee and the Board of Directors recommend a vote FOR the approval, on an advisory basis, of the compensation of Endo’s named executive officers as described in CD&A and in the other tabular and narrative executive compensation disclosures in this Proxy Statement.

 

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, 2019.

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

Members of the Compensation Committee:

William P. Montague (Chair)

Michael Hyatt (Member)

Roger H. Kimmel (Member)

 

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Compensation Discussion and Analysis

 

 

    Executive Summary

 

 

    

 

 

 

     A Message from Endo’s Chair of the Compensation Committee

 

 

        

     

 

Dear Shareholders:

 

This year’s proxy statement highlights decisions made by the Compensation Committee in the context of strong operating performance in 2019. As noted during the Company’s annual earnings release in February 2020, performance was driven by continued double-digit percentage revenue growth in Endo’s Sterile Injectables segment and in the Specialty Products portfolio of our Branded Pharmaceuticals segment, and as a result of our employees’ dedication to operational execution.

 

Endo’s strategic plan includes a set of key priorities that articulated a clear vision to be a highly focused specialty branded and generics pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization. Despite industry and Company challenges negatively impacting Endo’s market value in 2019, the Company’s management team remained focused, executing against Endo’s objectives and strategic growth priorities. In addition to the XIAFLEX® franchise growing approximately 24% compared to prior year, and VASOSTRICT® growing by 17% versus prior year, significant progress has been made toward the successful implementation of Endo’s CCH program for the treatment of cellulite in the buttocks. This progress includes the acceptance by the U.S. FDA of our original Biologics License Application in November 2019, the execution of key commercial activities and the advancement of the product supply implementation plan in preparation for an anticipated second half 2020 FDA approval of the BLA. Through these actions, Endo continues to build the product portfolio and capabilities for the future, while remaining focused on Company priorities.

 

In 2019, the Compensation Committee continued to evaluate the Company’s executive compensation program, while remaining committed to Endo’s pay-for-performance philosophy and alignment with shareholder interests. Throughout the course of the Company’s 2019 shareholder engagement discussions, the Compensation Committee received a high degree of positive feedback for the Company’s responsiveness to shareholder concerns raised in 2018 and support for the resulting changes implemented by the Compensation Committee in 2019 as summarized in the CD&A. We believe these changes also contributed to results of the most recent say-on-pay vote that yielded 95.5% support during the 2019 Annual Meeting, compared to 65.7% support during the 2018 Annual Meeting. Shareholders also conveyed support for the Company’s executive compensation programs and structure, as well as confidence in the Company’s strategy, operating performance and management team. In the discussions that took place in 2018 and 2019, shareholders emphasized the importance of encouraging management continuity, in light of the external challenges facing the Company. Shareholders also expressed support for Endo’s proactive management of shareholder dilution levels, and requested that the Company continue to maintain this as a priority in light of Endo’s reduced share price.

 

The Compensation Committee considered the results of the most recent say-on-pay vote and feedback from our shareholders and from third party advisory firms. The additional resulting actions taken by the Compensation Committee in 2019 and 2020 demonstrated the Compensation Committee’s focus on the importance of maintaining the continuity of senior management to continue to drive the Company’s strategic priorities, while judiciously managing share utilization and dilution levels in support of shareholder interests. For Endo employees, including the Company’s NEOs, significant realized value opportunities have been lost over the past several years due to external factors outside of the employees’ control, including unfavorable media coverage and political scrutiny and litigation relating to prescription opioid medication abuse. The negative impact these factors had on Endo’s share price created significant continuity risk and share usage concerns for the Company that required immediate attention. The actions implemented by the Compensation Committee as a result of this feedback were intended to directly address these concerns. First, continuity compensation arrangements were authorized by the Compensation Committee to increase realizable earnings for Endo’s most critical talent in an effort to help bridge the gap between current pay and competitive norms. In addition, the use of cash-based long-term incentives in 2020 was also authorized to address shareholder concerns regarding share usage and dilution resulting from Endo’s reduced share price, but also to serve as a separate mechanism to allow for predictable realizable value opportunities for all LTI-eligible employees. While the actions described in the CD&A deviate from Endo’s customary executive compensation practices, the Compensation Committee believes these decisions increased the level of motivation for Endo employees and contributed to Endo maintaining management continuity, both of which are paramount to the success of the business on an ongoing basis, especially in light of ongoing external challenges and to facilitate a successful leadership transition.

 

The Compensation Committee may also consider the impact of the COVID-19 pandemic on the Company in 2020. As is the case with many companies worldwide, this unprecedented situation is creating a multitude of business challenges, and we are actively monitoring the evolving situation. While it is impossible to determine the impact to Endo’s strategic priorities and performance at this stage, the Compensation Committee will follow the situation closely, and implement any necessary actions that serve in the best interests of the Company and our shareholders.

 

The Board appreciates the Company’s 2019 financial and operating performance and the dedication exhibited throughout the organization. With Blaise Coleman’s appointment to President and Chief Executive Officer and the management team’s continued focus on Endo’s values and objectives, the Board is confident in the Company’s ability to execute on Endo’s strategic priorities. While the COVID-19 pandemic is presenting unforeseen challenges to our country, our industry and Endo, the Board is confident in the management team’s ability to address the challenges facing the Company, and build on the strength in each of Endo’s core businesses. Endo, led by Blaise Coleman, is well positioned as it continues to focus on operational execution and the creation of long-term shareholder value.

 

Sincerely,

       

 

William P. Montague

 
       

LOGO

 
       

Chair of the Compensation Committee

 
         

 

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    Executive Summary (continued)

 

     
   

 

Strategic Vision and Results

 

 
   

 

A highly focused specialty branded and generics pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization.

 

 
   

 

2019 Strategic Operating Priority Highlights

 

LOGO

 

 
     
    

 

2019 Financial Highlights

(as a Percent of Annual Cash Incentive Compensation (IC) Target)

 

 

LOGO

 

 
               

 

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    Executive Summary (continued)

 

   
 

CEO Performance & Compensation Determination Summary

 

Paul V. Campanelli

Chairman, Chief Executive Officer and President

 

 
 

LOGO

 

Performance . The Compensation Committee’s (referred to in this “Compensation Discussion and Analysis” section as the Committee) assessment of Mr. Campanelli’s performance was based on the successful development and advancement of Endo’s strategic imperatives, the Company’s strong financial results and the achievement of operating performance objectives. These achievements were considered in the context of Endo’s multi-year turnaround plan built on organic growth in its core growth areas and portfolio optimization, investments made in progressing the Company’s growth assets and advancement of a more efficient cost structure and operating model focused on operational execution.

 
 

 

Despite significant external headwinds facing Endo and other specialty pharmaceutical companies which negatively impacted Endo’s market value in 2019, the Company, under Mr. Campanelli’s leadership, remained focused on advancing its transformational priorities and strategic growth objectives, as evidenced by the Company’s financial and operational performance. In summary, the Committee considered the following key factors and achievements as they relate to Mr. Campanelli’s performance in 2019:

 

 

LOGO

 

Compensation Determination Summary . On November 4, 2019, Endo announced that Mr. Campanelli notified the Board of his intention to retire. In connection with Mr. Campanelli’s retirement, the Committee implemented its Chief Executive Officer succession plan and, on December 12, 2019, approved a Letter Agreement with Mr. Campanelli, which governs the terms and conditions of his compensation during the succession planning and transition period until Mr. Campanelli’s retirement as an employee on December 31, 2020. The Letter Agreement provides that Mr. Campanelli will continue to receive his current base salary of $950,000 through December 31, 2020, with Mr. Campanelli remaining eligible to receive annual and long-term incentive compensation in 2020 for 2019 performance, as set forth in Mr. Campanelli’s Employment Agreement with Endo Health Solutions Inc., dated April 24, 2019. As set forth in the Letter Agreement, Mr. Campanelli will also be eligible to receive an annual cash bonus for 2020 based on a target level equal to 150% of base salary, subject to achievement of certain performance targets. In addition, Mr. Campanelli is eligible to receive an aggregate amount of $3,500,000 (the Transition Compensation) in consideration for: (i) his agreement to continue to serve as the Company’s Chief Executive Officer and President until a successor was appointed and (ii) his assistance in supporting an orderly succession planning and transition process through the end of 2020. Of the $3,500,000 of Transition Compensation, $1,500,000 was earned in December 2019 and $1,000,000 will be earned in each of June and December 2020. The arrangements noted in the Letter Agreement were offered in lieu of: (i) severance payments entitled under Mr. Campanelli’s Executive Employment Agreement; (ii) receiving a long-term incentive award in 2021 for 2020 performance based on the Company’s customary practice; and (iii) board compensation for service in 2020 as a board member and serving as Chairman of the Board of Directors. Following the Succession Planning and Transition Period and Mr. Campanelli’s retirement as a non-management employee on December 31, 2020, Mr. Campanelli will receive non-employee board compensation and/or fees for services as Chairman of the Board of Directors with the commencement of the 2021 annual board compensation cycle beginning on January 1, 2021. The “Individual Compensation Determination” section provides additional details concerning the terms of Mr. Campanelli’s Letter Agreement as well as the Committee’s compensation determination for all of Endo NEOs. On March 6, 2020, Mr. Blaise Coleman succeeded Mr. Campanelli as President and Chief Executive Officer.

 

 

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    Executive Summary (continued)

 

    

 

 

Consistent with Endo’s pay-for-performance philosophy, the Committee’s 2020 compensation determination for Mr. Campanelli aligns with his various achievements throughout 2019. In recognition of Mr. Campanelli’s individual performance and contributions in 2019 and the Company’s performance against the 2019 scorecard objectives, Mr. Campanelli was awarded an annual cash performance-based bonus equal to approximately 176.4% of his annual IC target. In consideration of Mr. Campanelli’s outstanding performance in 2019 in the capacity of Chief Executive Officer and President, the Committee also approved an LTI award with an expected target value based on Endo’s closing share price at the time of grant equal to $9,000,000. Consistent with Endo’s other NEOs, Mr. Campanelli’s 2020 LTI award was issued in the form of performance-based equity and a Long-Term Cash (LTC) award, each comprising 50% of his total LTI award. The performance-based equity consisted of PSUs with realizable value dependent upon the delivery of shareholder value and achievement of Adjusted Free Cash Flow (as defined in Executive Compensation Program—Long-Term Incentive Compensation—Performance Share Units) objectives over a cumulative three-year performance period. The combined use of PSUs and LTC awards in 2020 supported the Company’s share pool management priorities, and also allowed for a consistent approach for all executive management employees aimed at allocating a significant portion of the award in the form of performance-based LTI.

 

Mr. Campanelli’s LTI award and overall total Direct Compensation levels and pay mix were considered in the context of competitive practices among CEOs of both Endo’s Pay Comparator Companies and ISS Peer Group (2019 target Direct Compensation levels ranked below the 25th percentile compared to the Endo Pay Comparator Companies, and below the 50th percentile compared to the ISS Peer Group median) . Notwithstanding the Committee’s decision to issue LTC awards to all NEOs in 2020 in response to shareholder feedback to minimize share utilization and dilution levels during periods when Endo shares are trading at a significantly reduced share price, Endo’s customary CEO pay structure supports the Company’s pay-for-performance compensation philosophy in that only 8.6% of the expected target value of total Direct Compensation is fixed while 91.4% is variable and dependent upon performance.

 

The Company’s pay-for-performance compensation philosophy will be carried forward under the CEO compensation arrangement for Blaise Coleman, which will allocate approximately 10.9% of the expected target value of total Direct Compensation toward fixed compensation, while 89.1% will be variable and dependent upon performance. Since Mr. Coleman’s new employment agreement does not prescribe a specific LTI target, but instead provides for his LTI compensation to be determined at the sole discretion of the Committee based on the performance factors noted under Executive Compensation Program—Long-Term Incentive Compensation—Considerations, this allocation is based on the aggregate LTI target grant value of $6,100,000 issued to Mr. Coleman in 2020 (anticipating that equity-based LTI will be used in the future based on Endo’s customary practice), in addition to Mr. Coleman’s new base salary of $850,000 and annual cash incentive compensation target of 100%, resulting in a 2020 target total direct compensation value equal to $7,800,000.

 

Please see the below chart, which compares the expected target value of Mr. Campanelli’s compensation package for 2019 performance against the actual value authorized by the Committee in 2020 for such performance.

 

 

LOGO

 
 

 

The Summary Compensation Table’s footnote (2) provides details regarding adjustments to LTI valuations under ASC 718 for accounting and proxy reporting purposes.

 

 

 

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Executive Compensation Program

Compensation Philosophy

Our executive compensation program’s focus on human capital development emphasizes the importance of attracting, motivating and encouraging continuity of experienced and well-qualified executive officers through policies, programs and strategies that advance our critical business objectives and promote the creation of shareholder value over the long-term. The Committee believes that the most effective executive compensation program is one that is based on a pay-for-performance philosophy and 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 highly-talented individuals and motivating them to perform at the highest professional level, while embracing the Company’s Code of Conduct, key values and behaviors.

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, operating and compliance performance, without encouraging excessive risk;

   

Endo’s executive pay programs incorporate significant amounts of variable incentive-based compensation that directly aligns with Endo’s financial, strategic, operating, compliance and share price performance objectives; and

   

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

Endo’s executive compensation package supports this philosophy by offering annual and long-term incentive compensation opportunities that are performance-based. Incentive-based cash compensation awarded is subject to the Company achieving its annual performance objectives and realizing value in long-term equity is largely dependent upon Endo’s financial performance and the delivery of shareholder value.

The three principal components of the Company’s executive compensation package include base salary, annual cash incentive compensation and equity-based LTI compensation. Notwithstanding the Committee’s decision to use long-term cash awards in lieu of equity to manage shareholder dilution levels in 2020, 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 variable and dependent upon performance.

 

 

LOGO

In making decisions with respect to any element of an NEO’s compensation, the Committee considers the total compensation that may be awarded to the officer, including salary, annual incentive compensation cash bonus and long-term incentive compensation. In addition, in reviewing and approving employment agreements for NEOs, the Committee considers the other benefits to which the officer is entitled by the agreement, including compensation payable upon termination of employment under a variety of circumstances. The Committee’s goal is to award compensation that is competitive to attract and retain highly-qualified leaders and motivate high business performance. The Committee believes that its compensation programs align executive and shareholder interests by effectively calibrating compensation payout levels with individual and Company performance.

Considerations

Competitive Considerations . In making compensation decisions with respect to each element of compensation, the Committee considers the competitive market for executives and compensation levels provided by comparable companies. The Committee reviews the compensation practices at companies with which the Company 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 as a tool to assess the reasonableness and competitiveness of our compensation practices.

 

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The 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 Committee’s choice of this target percentile reflects the Company’s consideration for our shareholders’ interests in paying what is competitive to achieve our corporate goals.

We believe that, given our compensation philosophy and objectives, compensation targeted at the median of similarly-situated companies with the opportunity for top quartile total compensation based upon performance is generally sufficient to retain our current executive officers and to hire new executive officers when and as required. In setting compensation for the NEOs, the Committee considers comparative market data requested by the Committee from Korn Ferry, its compensation consultant. In gathering relevant competitive market compensation data, the Committee approved the use of a sample of companies with similar operations to Endo, which we refer to collectively as the “Pay Comparator Companies.”

The Committee believes that Endo competes with the Pay Comparator Companies for talent and for shareholder investment. In assessing the relevance of the Pay Comparator Companies, Korn Ferry 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 revenue 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.

The Pay Comparator Companies typically have similar executive officer positions; however, the 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 Committee uses Pay Comparator Companies market comparisons as one factor in making compensation decisions. Other factors considered when making individual executive compensation decisions include individual contribution and performance, reporting structure, complexity and importance of role and responsibilities, leadership, growth potential and secondary executive compensation survey sources specific to the pharmaceutical industry, among others.

Korn Ferry makes periodic 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 to include organizations that were relevant to Endo’s size and business composition. The 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 Committee-approved Pay Comparator Companies for 2019 are listed in the table below:

 

 

2019 Pay Comparator Companies

 

Alexion Pharmaceuticals Inc.

 

Jazz Pharmaceuticals plc

Alkermes plc

 

Mallinckrodt plc

Amneal Pharmaceuticals Inc.

 

Mylan NV

Bausch Health Companies Inc.

 

Perrigo Co. plc

Biogen Inc.

 

Regeneron Pharmaceuticals

BioMarin Pharmaceutical Inc.

 

United Therapeutics Corporation

Horizon Pharma plc

 

Vertex Pharmaceuticals Inc.

Incyte Corporation

 

 

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Pay Risk and Governance . The 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 the Committee:

 

 

What We Do

 

 

   

Maintain a Compensation Committee composed entirely of independent directors

 

 

 

Engage with shareholders and third party advisory firms on governance and compensation matters

 

 

 

Retain an independent executive compensation consultant to the Committee

 

 

 

Conduct annual assessments of NEO pay positioning against Pay Comparator Companies

 

 

 

Complete independent annual reviews of risks associated with compensation arrangements, policies and practices

 

 

 

Implement an executive pay program that is highly concentrated on variable short- and long-term incentive compensation tied to individual and Company performance

 

 

 

Grant LTI awards that are generally subject to three-year vesting conditions

 

 

 

Grant NEO LTI awards comprised of a minimum of 50% PSUs, tied to relative TSR and Adjusted Free Cash Flow performance over a three-year cumulative performance period

 

 

 

Maintain ownership guidelines for executive management and non-employee directors

 

 

 

Maintain a compensation recovery (clawback) policy that applies to both cash- and equity-based incentives in situations involving material misconduct or gross negligence resulting in material financial harm to the Company

 

 

 

 

 

What We Don’t Do

 

 

   

Reward executives for excessive, inappropriate, or unnecessary risk-taking

 

 

 

Authorize special or off-cycle LTI awards to current NEOs (except for new hire and promotion situations)

 

 

 

Allow re-pricing of equity awards without shareholder approval

 

 

 

Allow cash buyouts of underwater options

 

 

 

Allow hedging and pledging of Company shares

 

 

 

Grant single-trigger vesting of LTI awards upon change in control

 

 

 

Enter into employment agreements with automatic renewal provisions (except as required by local law)

 

 

 

Allow change in control gross-up payments

 

 

 

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 Korn Ferry and then reviewed by the 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 business areas; and

   

An analysis of employee compensation plans with the highest potential for risk, pursuant to which we:

   

Identify the features within the plans that could potentially encourage excessive or imprudent risk-taking;

   

Identify business risks that these features could potentially encourage;

   

Identify controls and plan features that mitigate the risks identified;

   

Determine residual risk remaining after having identified mitigating controls and features; and

   

Assess whether residual risk is reasonably likely to have a material adverse effect on the Company as a whole.

The 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 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 ongoing 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 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.

 

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Say-on-Pay and Shareholder Engagement Feedback . In establishing 2020 compensation, the Committee considered the results of the most recent say-on-pay vote at the Company’s Annual Meeting held in June 2019, where approximately 95.5% of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Committee also considered the results of its recent shareholder engagement efforts that were undertaken based on the Board’s belief that regularly engaging with shareholders as a means of soliciting their views on matters such as corporate governance, environmental and social initiatives, executive compensation and other important topics, is important in assisting the Board with items requiring a broader shareholder perspective.

In 2019, Mr. Montague, who serves as our Chair of the Committee, and certain members of our management team undertook efforts to engage with shareholders and reached out to holders of approximately 88% of Endo’s ordinary shares outstanding, following 2018 discussions with shareholders, as well as ISS and Glass Lewis. The 2018 conversations resulted in changes being implemented by the Committee in 2019, including:

   

Placing more emphasis on performance-based equity for NEOs in the form of 50% PSUs and 50% RSUs, representing an increase in the proportion of PSUs compared to 2018

   

Increasing the length of the PSU performance period by introducing an FCF metric measured over a single three-year period, compared to three one-year periods prior to 2019, in addition to relative TSR measured over a three-year period

   

No longer authorizing special or off-cycle LTI grants for NEOs, except for new hire and promotion situations

Following the implementation of these changes, the Company’s 2019 shareholder engagement process resulted in the following feedback:

   

A high degree of support for the Company’s responsiveness to shareholder concerns raised in 2018 and agreement with the resulting changes implemented by the Committee

   

Continued support for the Company’s strategy, performance and management, as well as Endo’s executive compensation policies, plan designs and metrics used

   

Significant shareholder focus on Endo motivating top talent with an emphasis on encouraging management continuity during a period of significant external headwinds facing Endo and other specialty pharmaceutical companies

   

Support for the Company’s proactive management of share utilization, and emphasis on minimizing shareholder dilution levels

In consideration of the feedback received from shareholders in 2019, as well as internal discussions, the Committee implemented the following actions to align Endo’s executive compensation program with the Company’s priorities in 2019 and 2020:

 

 

Company Decisions

 

  

 

Implemented Actions

 

Implement arrangements to retain critical leadership positions

  

In July 2019, the Committee approved cash-based compensation arrangements (Continuity Compensation) for critical leadership positions of the Company, excluding Mr. Campanelli, but including Messrs. Coleman, Coughlin, Maletta and Barry based on the critical nature of their leadership and contributions to the planning and execution of Endo’s transformational strategy and multi-year turnaround plan

Limit the use of equity in 2020 in support of share utilization and dilution objectives

   For the 2020 annual grant, equity was exclusively granted to members of the Company’s Executive Leadership Team (in the form of PSUs), with LTC awards granted to all employees participating in the LTI Program

The feedback received from shareholders relating to encouraging management continuity as well as the Company’s stock utilization limitations are material concerns also shared by the Board. For Endo employees, including the Company’s NEOs, significant realized value opportunities have been lost over the past several years due to external factors outside of the employees’ control, including unfavorable media coverage and political scrutiny and litigation relating to prescription opioid medication abuse. The negative impact these factors had on Endo’s share price created significant continuity risk and share usage concerns for the Company that required immediate attention.

The actions implemented by the Committee as a result of this feedback were intended to directly address these concerns. First, continuity compensation arrangements were authorized by the Committee to increase realizable earnings for Endo’s most critical talent in an effort to help bridge the gap between current pay and competitive norms. In addition, the use of cash-based long-term incentives in 2020 was also authorized to address shareholder concerns regarding share usage and dilution resulting from Endo’s reduced share price, but also to serve as a separate mechanism to allow for predictable realizable value opportunities for all LTI-eligible employees. Both actions were required to maintain management continuity and increase the level of motivation for Endo employees, which in turn are key to driving the success of the business on an ongoing basis.

These shareholder discussions have provided the Board with insights into evolving shareholder views, while serving as an effective communication channel for matters of critical importance to Endo’s short- and long-term priorities and other shareholder interests. The Committee will continue to consider shareholder feedback and the results of future say-on-pay votes when making executive compensation decisions and policies. Such votes are expected be conducted annually at least until the Company solicits the next shareholder advisory vote on the frequency of such votes, which is scheduled to occur no later than June 2023.

 

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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 initially determined by their employment agreements, which are described under “Employment and Change in Control Agreements; Severance Agreements” below. These salaries and the amount of any increases over these salaries are determined by the 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 and secondary executive compensation survey sources specific to the pharmaceutical industry;

   

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 Committee adjusts salaries from time to time to realign salaries with market levels, individual performance and incumbent experience. The Committee 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 annual incentive compensation and long-term incentive targets, where such an adjustment would correct a compensation imbalance, as the Committee deems appropriate.

2019 Decisions Regarding Base Salary . In October 2019, as part of the Committee’s annual review of compensation, Korn Ferry provided the Committee with a market assessment of the competitive compensation for the Company’s executive officers. This assessment included reviewing the Pay Comparator Companies and secondary executive compensation survey sources specific to the pharmaceutical industry 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 Committee developed, with the assistance of Korn Ferry, market medians of compensation for each of Endo’s compensation elements (base salary, target annual incentive compensation and expected target 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 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. Both 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.

 

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The Committee annually assesses each NEO’s achievement against the Company’s annual pre-established and formulaic objectives, which allow for a maximum bonus equal to 225% of the target bonus amount. The Committee then determines the level of realized performance based on quantifiable Company scorecard and individual performance objectives. The following illustrates the mechanics underlying the annual cash incentive calculation:

 

LOGO

The respective annual cash incentive compensation target for each NEO related to 2019, paid in early 2020, is expressed in the graph below.

 

LOGO

Please reference the “Individual Compensation Determination” section for additional information.

Considerations . The annual cash incentive compensation program includes relative incentive levels based on each NEO’s specific position accountabilities and impact on overall Company strategic, operating and compliance performance, with target awards established as a percentage of base salary. Each NEO’s target annual incentive compensation bonus is initially established pursuant to his employment agreement, which is determined based on all factors that the Committee deems relevant, including (but not limited to) a review of Pay Comparator Company compensation. The annual incentive compensation metrics are aligned with the Company’s business strategy and the use of the Company scorecard objectives including Adjusted Revenue, Adjusted EBITDA Margin, Adjusted Diluted EPS from Continuing Operations and non-financial metrics, and are supported by practices among our Pay Comparator Companies. The 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. 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.

Discretion . Under the annual incentive compensation program, the Committee has discretion, in appropriate circumstances and subject to certain limitations, to pay annual incentive compensation at less than or in excess of target levels. For example, in determining the extent to which the pre-set performance goals are met for a given period, the Committee exercises its judgment in determining whether to reflect or exclude the impact of changes in accounting principles and unusual or infrequently occurring events reported in the Company’s public filings. Further, pursuant to each of our NEO’s employment agreements, target annual incentive compensation as a percentage of annual base salary may subsequently be increased at the discretion of the Committee. Please reference the “Individual Compensation Determination” section for approved target annual incentive compensation changes.

 

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2019 Decisions Regarding Incentive Compensation . The following information summarizes the components of the Company’s annual incentive compensation program and the basis for the actual award granted by the Committee for 2019. With respect to 2019, the annual award for each NEO was based on the achievement of corporate scorecard objectives and NEO individual performance. The corporate scorecard and individual NEO performance objectives are aligned with the Company’s new priorities established as part of the 2019 strategic assessment process. The performance goals associated with the corporate scorecard were weighted as follows (specific targets are discussed in the following section entitled “2019 Consolidated Financial Results”):

 

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). The Committee also has the discretion to withhold annual cash incentives that otherwise would be made to any 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 (i) 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 FDA, and (ii) progress on health and safety outcomes as determined by other regulatory and environmental matters.

2019 Consolidated Financial Results . In 2019, we achieved double-digit year-on-year revenue increases in our core growth areas (the Specialty Products portfolio of our Branded Pharmaceuticals segment and our Sterile Injectables segment). However, as expected and anticipated in our 2019 financial guidance, 2019 also had Adjusted Revenue declines due to competitive pressures in our Generic Pharmaceuticals and International Pharmaceuticals segments and the Established Products portfolio of our Branded Pharmaceuticals segment. These declines, together with certain other factors including expected changes in product mix resulting from higher sales of certain lower margin authorized generic products, also contributed to year-on-year decreases in Adjusted EBITDA Margin and Adjusted EPS from Continuing Operations. We considered these and other factors in determining our 2019 financial guidance and the associated annual cash incentive compensation program’s performance objectives approved by the Committee, including the year-on-year reductions to the Adjusted EBITDA Margin and Adjusted Diluted EPS from Continuing Operations targets. Although lower than the 2018 results, the annual incentive compensation program’s performance objectives were intended to be challenging, yet aligned with the Company’s 2019 goals, taking into consideration the factors explained above.

 

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On an adjusted basis, we achieved the following financial objective results in 2019 compared to prior year financial performance:

   

Achieved $2.910 billion and $2.952 billion in Adjusted Revenue in 2019 and 2018, respectively, consisting of $2.914 billion and $2.947 billion of revenue determined in accordance with U.S. generally accepted accounting principles (GAAP), adjusted as described below.

   

Achieved 45.1% and 46.0% in Adjusted EBITDA Margin in 2019 and 2018, respectively, consisting of $0.423 billion and $1.031 billion, respectively, of net loss determined in accordance with GAAP, adjusted as described below, divided by $2.910 billion and $2.952 billion, respectively, in Adjusted Revenue as described above.

   

Achieved $2.37 and $2.90 in Adjusted Diluted EPS from Continuing Operations in 2019 and 2018, respectively. These amounts consist of $1.60 and $4.29 of diluted loss per share from continuing operations determined in accordance with GAAP, adjusted as described below.

   

Fully adjusted amounts are summarized in the graph below (Adjusted Revenue amounts are reported in millions).

 

LOGO

 

(1)

Adjusted Revenue, Adjusted EBITDA Margin and Adjusted Diluted EPS from Continuing Operations are not prepared in accordance with GAAP. In calculating these amounts, each amount is adjusted from GAAP 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 adjustments: for unbudgeted acquisitions during the performance period to include deal model base case revenue and EPS commitments in the Company’s performance targets; for unbudgeted dispositions during the performance period; for unplanned material changes in share count during the performance period; and to neutralize foreign exchange impact versus budget during the performance period.

(2)

EBITDA represents net income (loss) before interest expense, net; income tax; depreciation; and amortization, each prepared in accordance with GAAP. Adjusted EBITDA further adjusts EBITDA by adjusting for the items enumerated in note (1) above and by excluding other (income) expense, net; share-based compensation; certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, retention payments, excess inventory reserves, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; discontinued operations, net of tax; and certain other items. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by Adjusted Revenue.

(3)

To arrive at Adjusted Diluted EPS from Continuing Operations, GAAP diluted EPS from continuing operations is adjusted for the items enumerated in note (1) above and for certain upfront and milestone payments to partners; acquisition-related and integration items, including transaction costs and changes in the fair value of contingent consideration; cost reduction and integration-related initiatives such as separation benefits, retention payments, other exit costs and certain costs associated with integrating an acquired company’s operations; asset impairment charges; amortization of intangible assets; inventory step-up recorded as part of our acquisitions; litigation-related and other contingent matters; certain legal costs; gains or losses from early termination of debt; gains or losses from the sales of businesses and other assets; foreign currency gains or losses on intercompany financing arrangements; and certain other items, including the impact of including dilutive securities if EPS moves from a net loss position to a net income position; further adjusted for the tax effect of adjusted pre-tax income at applicable tax rates and other tax adjustments.

Overall Company Performance Against Objectives . In addition to the financial results above, other performance goals are established in alignment with the Company’s strategic, operating and compliance priorities. Further, the goals are developed to incentivize 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 2019 financial objectives, as well as the Company’s strategic, operating and compliance priorities.

 

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The Committee reviewed the Company’s achievement of the scorecard objectives set forth above for 2019, and made the following performance determination, which applies to each NEO (certain amounts may not recalculate due to rounding):

 

    

Plan Weightings

 

    

 

Payout Percent
(Target 100%)

 

    

 

Final Company
Performance

 

 

Adjusted Revenue

  

 

24.5%

 

  

 

122.2%

 

  

 

29.9%

 

Adjusted EBITDA Margin

  

 

21.0%

 

  

 

92.3%

 

  

 

19.4%

 

Adjusted Diluted EPS from Continuing Operations

  

 

24.5%

 

  

 

150.0%

 

  

 

36.8%

 

Strategic/Operating/Compliance Priorities

  

 

30.0%

 

  

 

105.0%

 

  

 

31.5%

 

                        

Total

  

 

100.0%

 

     

 

117.6%

 

                    
                    

Details behind the Company performance objectives, relative weighting and actual results are summarized below from the 2019 Company performance scorecard (certain amounts may not recalculate due to rounding and select results have been generalized due to competitive considerations):

 

Objective

 

 

 

2019 Results

 

 

Weighting

 

   

Achievement
Level

 

   

 

Contribution 
(Weighting x 
Achievement) 

 

 

 

FINANCIAL OBJECTIVES

 

   

 

 

 

 

 

 

70.0%

 

 

 

 

 

 

 

 

 

 

 

 

123.0%

 

 

 

 

 

 

 

 

 

 

 

 

86.1% 

 

 

 

 

 

 

Adjusted Revenue Goal(1)

 

 

 

 

Meet or Exceed Adjusted Revenue of $2.847 billion

 

 

 

 

Adjusted Revenue at 102.2% of annual IC target

 

 

 

 

 

 

 

24.5%

 

 

 

 

 

 

 

 

 

122.2%

 

 

 

 

 

 

 

 

 

29.9% 

 

 

 

 

Adjusted EBITDA Margin Goal(1)

 

 

 

 

Meet or Exceed Adjusted EBITDA Margin of 45.3%

 

 

 

 

Adjusted EBITDA Margin at 99.6% of annual IC target

 

 

 

 

 

 

 

 

21.0%

 

 

 

 

 

 

 

 

 

92.3%

 

 

 

 

 

 

 

 

 

19.4% 

 

 

 

 

Adjusted Diluted EPS from Continuing Operations Goal(1)

 

 

 

 

Meet or Exceed Adjusted Diluted EPS from Continuing Operations of $2.08

 

 

 

Adjusted Diluted EPS from Continuing Operations at 113.9% of annual IC target

 

 

 

 

 

 

 

 

24.5%

 

 

 

 

 

 

 

 

 

150.0%

 

 

 

 

 

 

 

 

 

36.8% 

 

 

 

 

 

 

STRATEGIC, OPERATING AND COMPLIANCE PRIORITIES

 

 

 

 

 

 

 

 

 

 

30.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

105.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.5% 

 

 

 

 

 

 

 

Reshape our organization for success

 

 

 

 

Meet FDA and DEA requirements, including no warning letters received and no quality system failures that result in regulatory action, while improving other key metrics

 

 

 

 

Met all FDA and DEA objectives and improved other key metrics including recall reductions and decreased Field Alerts for Endo sites

 

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

2.0% 

 

 

 

 

 

Execute Pathway to One SAP initiative, achieving critical project stage gates

 

 

 

Successfully executed 2019 objectives, including extended Phase 1 deliverables

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

110.0%

 

 

 

 

 

 

 

 

 

2.2% 

 

 

 

   

Advance employee engagement plan
and developmental initiatives that
contribute to the retention of high-
performing talent

 

 

 

Delivered on an extensive number of
engagement initiatives, and exceeded
high-performing retention objectives

 

 

 

 

2.0%

 

   

 

110.0%

 

   

 

2.2% 

 

 

 

Build our portfolio and capabilities for the future

 

 

 

Achieve XIAFLEX ® volume growth target objective

 

 

 

 

Significantly exceeded volume objectives, achieving double-digit growth

 

 

 

 

 

 

 

 

4.0%

 

 

 

 

 

 

 

 

 

150.0%

 

 

 

 

 

 

 

 

 

6.0% 

 

 

 

 

 

Achieve generics and sterile injectables new product launch objectives

 

 

 

Achieved objective, launching 14 new product entries

 

 

 

 

 

 

 

4.0%

 

 

 

 

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

4.0% 

 

 

 

 

 

Build India R&D capabilities and achieve high-value FDA filing objectives

 

 

 

Achieved India R&D objectives and completed 4 high-value FDA filings, including 2 sterile injectables

 

 

 

 

 

 

 

4.0%

 

 

 

 

 

 

 

 

 

75.0%

 

 

 

 

 

 

 

 

 

3.0% 

 

 

 

 

 

Progress CCH launch readiness initiatives, including commercial, R&D and product supply objectives

 

 

 

Achieved commercial launch readiness milestones, as well as BLA activities leading to the targeted September 2019 submission date, and product supply implementation plan objectives

 

 

 

 

 

 

4.0%

 

 

 

 

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

4.0% 

 

 

 

 

Drive margin expansion and de-lever

 

 

 

Achieve inventory write-off objective

 

 

Achieved inventory write-off reduction objective

 

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

100.0%

 

 

 

 

 

 

 

 

 

2.0% 

 

 

 

 

 

 

Meet backorder reduction objective

 

 

Exceeded weekly backorder reduction objective

 

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

110.0%

 

 

 

 

 

 

 

 

 

2.2% 

 

 

 

 

 

Achieve total adjusted operating expense objective

 

 

 

Achieved slightly higher total adjusted operating expense compared to budgeted target

 

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

90.0%

 

 

 

 

 

 

 

 

 

1.8% 

 

 

 

 

Deliver on year-end 2019 Net Debt Leverage Ratio guidance

 

 

Exceeded year-end Net Debt Leverage Ratio objective

 

 

 

 

 

 

 

2.0%

 

 

 

 

 

 

 

 

 

105.0%

 

 

 

 

 

 

 

 

 

2.1% 

 

 

 

 

(1)

Refer to the section above entitled “2019 Consolidated Financial Results” for discussion of Adjusted Revenue, Adjusted EBITDA Margin and Adjusted Diluted EPS from Continuing Operations.

 

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The Committee also considered each NEO’s individual performance and awarded the NEOs the 2019 annual cash IC bonus amounts set forth in the “Individual Compensation Determination” section. See also below under the heading “Employment and Change in Control Agreements; Severance Agreements” regarding how each NEO with an employment agreement is entitled to annual cash incentive compensation as a percentage of salary under certain circumstances.

Long-Term Incentive Compensation

Purpose . Notwithstanding the Committee’s decision to use long-term cash awards in lieu of equity to manage shareholder dilution levels in 2020, 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 below. The LTI Program described below 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 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 make significant contributions to the success of the Company;

   

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

   

Retain eligible individuals who have skills critical to the long-term success of the Company.

The LTI compensation program provides an annual grant that is directly aligned with Endo’s financial, strategic, operating, compliance and share price performance objectives. 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. Typically, LTI awards for NEOs are equity-based providing for the opportunity to award a combination of PSUs, RSUs and/or stock options.

The Company believes that targeted combinations of PSUs, RSUs and/or 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/or stock options is supported by the pattern of equity-based awards that prevails in the Pay Comparator Companies and in the external market generally.

For the 2019 annual grant, based on feedback received during the 2018 shareholder engagement process and ongoing internal discussions, the Committee determined to change the LTI mix for each NEO to 50% PSUs and 50% RSUs, with the PSU performance metrics tied to relative TSR and free cash flow performance metrics (each measured over a cumulative three-year performance period). The Committee believes these changes to the LTI mix strengthen the LTI Program’s long-term orientation and reflect the creation and preservation of long-term shareholder value. Please reference the “Performance Share Units” section for details concerning the relative TSR and free cash flow three-year performance periods.

In addition, the Committee’s decision to approve a management-recommended company-wide 20% LTI reduction factor allowed Endo to continue to support the Company’s share utilization priorities. These priorities are focused on optimizing the use of equity-based LTI compensation, while responsibly managing share pool usage and dilution. Since Mr. Campanelli’s LTI compensation is determined at the sole discretion of the Committee, this decision to apply a company-wide reduction in LTI was considered (in addition to Mr. Campanelli’s performance and competitive pay positioning) when determining the expected target value of Mr. Campanelli’s 2019 LTI award.

In 2020, select actions were taken by the Committee in support of the Company’s 2020 priorities, and in direct response to shareholder feedback. As part of the Committee’s continued efforts to manage share utilization and underlying dilution levels, the Committee limited the use of equity for the 2020 annual grant, exclusively granting equity to members of the Company’s Executive Leadership Team, which was granted in the form of PSUs. In connection with this decision, the Committee also authorized the use of cash-based LTC awards for all LTI recipients, including the Company’s NEOs. LTC awards are fixed cash-based long-term incentive awards that are generally scheduled to vest ratably over a three-year period. This decision allowed the Company to offer LTI recipients target long-term award values that are aligned with competitive practices, while also addressing shareholder feedback relating to encouraging management continuity during a period of significant external headwinds facing Endo and other specialty pharmaceutical companies. Excluding the LTI award granted to Mr. Coleman in connection with his appointment to CEO described under the “Individual Compensation Determination” section, annual LTI awards for all NEOs accounted for approximately 29.7% of the total expected target value issued to all eligible employees as part of the 2020 annual grant.

 

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The annual LTI mix for the Company’s Executive Leadership Team, including Mr. Campanelli, is reflected in the graph below.

 

LOGO

Considerations . In determining the annual LTI grants for the NEOs, the Committee considered market data on total compensation packages, the value of long-term incentive grants at the Pay Comparator Companies, TSR, 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. Further, performance is considered based on a collective group of factors focused on financial, strategic, operating and compliance, which drives the Company’s future success as a highly focused specialty branded and generics pharmaceutical company delivering quality medicines to patients in need through excellence in development, manufacturing and commercialization. At the end of the performance year, each NEO’s performance is assessed and then factored into the awarding of LTI 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:

 

 

Factors

 

   

 

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

 

    

 

Strengthening the balance sheet by effectively managing capital and cash flow conversion

 

 

Focus on operational execution and the achievement of 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 efficient operating model

 

 

 

Achievement of quality and compliance objectives

    

 

Relative shareholder value creation and preservation

 

Based upon the achievement of Company goals and individual objectives, the Company’s President and Chief Executive Officer recommends an adjustment to each NEO’s annual LTI compensation target based upon performance related to key job accountabilities and annual performance objectives. The recommendation is then reviewed by the Committee, which has discretion to modify the final award. Regarding the award for the Company’s President and Chief Executive Officer, the Committee follows a similar process and has the ultimate discretion for determining the annual equity award.

The LTI compensation target for each NEO excluding Mr. Campanelli related to 2019 performance, granted in early 2020, is reflected in the graph below. Mr. Campanelli’s LTI compensation is determined at the discretion of the Committee.

 

LOGO

Discretion . Mr. Campanelli’s employment agreement does not prescribe a specific LTI target but instead provides that his LTI compensation would be determined at the sole discretion of the Committee if the Company and executive achieve certain performance targets set by the Committee with respect to each year ending during Mr. Campanelli’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 Committee by the President and Chief Executive Officer and approved by the Committee). The Committee may use negative discretion to take into

 

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account factors outside of the pre-established performance objectives to reflect extraordinary business circumstances. Further, pursuant to each of our NEO’s employment agreements, target LTI as a percentage of annual base salary may subsequently be increased at the discretion of the Committee. Please reference the “Individual Compensation Determination” section for approved target LTI changes.

Performance Share Units . PSU awards are granted annually to the Company’s NEOs, based on a plan design that utilized two discrete measures: relative TSR performance and Adjusted Free Cash Flow, both measured over cumulative three-year performance periods. The number of PSUs awarded to each executive continues to be based on a targeted percentage of the executive’s base salary, with the actual number of shares awarded adjusted based on relative TSR and Adjusted Free Cash Flow performance. The actual share award is released at the end of the three-year period depending on how well the Company performed against the targets set at the beginning of the performance period.

In February 2019, the Committee implemented a change to the PSU plan design in response to feedback received during the 2018 shareholder engagement process and ongoing internal discussions. To further strengthen the program’s long-term performance-based orientation and reflect the creation and preservation of long-term shareholder value, the Adjusted Free Cash Flow performance metric was changed from three one-year annual Adjusted Free Cash Flow targets, to a single three-year Adjusted Free Cash Flow target.

Under this new design, the 50% portion of the PSUs tied to Adjusted Free Cash Flow performance will not vest unless the Company’s cumulative three-year free cash flow performance reaches the minimum 90% of target threshold, at which an attainment multiple of 0.5x will apply, while the maximum attainment multiple of 2x can only be achieved if the Company’s cumulative three-year free cash flow performance is at or above 110% of target. Award levels will be interpolated between the 0.5x and 2x payout multiples. The performance period for the 2019 awards measured against Adjusted Free Cash Flow performance began on January 1, 2019 and ends on December 31, 2021.

The 50% portion of the PSUs tied to relative TSR performance will be measured against the three-year TSR of a custom index of companies. The custom index utilized for the 2019 grant was initially comprised of a statistically meaningful group of 40 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 this design, the portion of the PSU award that is tied to relative TSR performance will not vest unless the three-year TSR results reach the 40 th percentile minimum threshold, at which an attainment multiple of 0.5x will apply, while the maximum attainment multiple of 2x can only be achieved if the Company’s percentile rankings is at or above the 90 th percentile over the performance period. Further, a maximum of 1x of the award will vest if the Company’s TSR for the performance period is negative, with no payout made if results are below the 40 th percentile. Award levels based on positive TSR results will be interpolated between the 1x and 2x payout multiples. The performance period for the 2019 awards measured against relative TSR performance began on March 29, 2019 and ends on March 29, 2022 and will be assessed at the end of the performance cycle.

For the 2020 PSU grant, the awards followed the same program design with no changes to the relative TSR and Adjusted Free Cash Flow performance schedules. However, the performance periods changed to coincide with the timing of the 2020 grants such that performance for the awards tied to Adjusted Free Cash Flow and relative TSR performance will be measured from January 1, 2020 through December 31, 2022 and from March 6, 2020 through March 6, 2023, respectively. In addition, the custom index used to measure relative TSR performance for the 2020 grant was updated to reflect the current list of 38 pharmaceutical companies. The performance schedules for the 2019 and 2020 PSUs are shown in the charts below:

 

 

LOGO   LOGO

 

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“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” or “TSR” 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 Committee following an independent third-party confirmation of the results.

“Adjusted Free Cash Flow” means Adjusted EBITDA (see additional discussion of Adjusted EBITDA above under “2019 Consolidated Financial Results”), adjusted for changes in net working capital and reduced by cash payments for capital expenditures. Adjusted Free Cash Flow and Adjusted EBITDA are not prepared in accordance with GAAP.

Restricted Stock Units . In addition to the PSUs described above, our NEOs are also typically 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 vest ratably over three years.

Stock Options . Stock options represent the third element of our equity-based LTI compensation package, and are designed to reward NEOs only if our share price increases. When offered, 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 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 option grants to NEOs have been awarded with a term of ten years, but were not issued as part of the 2019 or 2020 annual grant cycles.

Long-Term Cash . As described earlier, LTC awards are fixed cash-based long-term incentive awards offered in 2020 as a means of managing share utilization and maintaining acceptable shareholder dilution levels, while offering LTI recipients target long-term award values that are aligned with competitive practices. LTC awards can only be settled in cash, and vest ratably every six months over a three-year period for NEOs.

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, stock options and LTC awards become eligible for continued vesting, following certain termination events, 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 applicable performance or vesting period, if applicable.

Timing of Grants . In 2019, the annual grant date occurred on the last business day in March. Effective with the 2020 annual grant, the timing of the annual LTI award for employees has moved to a new common grant date, which occurs approximately one week after the filing of the 10-K to better align the timing of the grant with the annual compensation planning and performance management processes. The number of PSUs, RSUs and/or stock options awarded will be based on a determined grant date fair market value (as determined in the sole discretion of the Committee, but in no event shall the determined grant date fair market value be less than the closing price as of the date of the grant). This is intended to grant the annual equity awards after the annual earnings release, while allowing for a sufficient amount of time between the filing of the Company’s 10-K and the date of Endo’s annual grant. Consistent with the Company’s customary practice, new hire and promotion grants may also be awarded to eligible employees.

2019 Decisions Regarding LTI Compensation . In 2019, the Committee awarded LTI compensation for NEOs pursuant to the program described above resulting in the awards identified in the Summary Compensation Table and the 2019 Grants of Plan-Based Awards Table. For grants awarded in 2020 based on 2019 performance, the Committee reviewed the Company’s achievements as well as each NEO’s contributions and awarded the NEOs the LTI amounts set forth in the “Individual Compensation Determination” section.

Additional Compensation Components

The Company’s current practice is to limit use of perquisites. In 2019, other than as described below, the only perquisites offered to the NEOs were certain financial and legal services, executive physicals, spousal travel and attendance (and certain costs associated with participant attendance) at certain Endo-sponsored events and meetings where an NEO’s attendance is requested by the Company, term life and long-term disability insurance, housing allowances and relocation planning and related services. The Company currently offers two executive retirement programs including the 401(k) Restoration Plan and the Executive Deferred Compensation Plan, each of which is described below. Both plans were effective January 1, 2008, with the 401(k) Restoration Plan and the Executive Deferred Compensation Plan amended and restated in 2014 and 2018, respectively.

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 Section 401(a)(17) amount in the Code (or other criteria set by the Committee), including NEOs, to defer eligible pay after such individual’s contribution to the Company’s existing qualified 401(k) plan has exceeded the maximum. The Company does not fund employer matching contributions in the 401(k) Restoration Plan.

 

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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 Code earnings limit for the qualified 401(k) ($285,000 for 2020). 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 following year’s LTI compensation that is granted in RSUs that settle in shares of our stock.

Deferral of the RSUs delays the imposition of federal and state (as allowed under state laws) taxes, which normally applies when the RSUs vest. The taxable event is delayed 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 incentive compensation award. When an executive makes his or her irrevocable election to defer cash incentive compensation, he or she also elects a specified payment date in which the elected disbursement(s) under the participant’s account will commence.

Employment and Change in Control Agreements; Severance Agreements

The Company generally enters into a written employment agreement with each of the NEOs. The purpose of these agreements and the compensation and benefits provided for therein is to aid recruitment and retention and to reinforce an ongoing commitment to shareholder value creation and preservation.

On April 24, 2019, the Company entered into an executive employment agreement with Mr. Campanelli, which was effective April 24, 2019 and has a term through September 23, 2022, to replace his prior agreement dated September 23, 2016, which had a three-year term.

On July 30, 2019, the Committee approved Continuity Compensation arrangements for critical leadership positions in the Company, excluding Mr. Campanelli, but including the following named executive officers: Messrs. Coleman, Coughlin, Maletta and Barry. The Continuity Compensation arrangements were extended to these NEOs in response to shareholder feedback based on the critical nature of the leadership and contributions of these NEOs to the planning and execution of Endo’s transformational strategy and multi-year turnaround plan.

On December 9, 2019, the Company entered into a new executive employment agreement with Mr. Coughlin, which was effective December 9, 2019 and has a term of three years, to replace his prior agreement, dated December 9, 2016, that expired pursuant to its terms.

On December 12, 2019, the Committee approved a Letter Agreement in connection with Mr. Campanelli’s announced retirement as President and Chief Executive Officer. The Letter Agreement governs the terms and conditions of Mr. Campanelli’s compensation during the succession planning period until a successor Chief Executive Officer was appointed, and subsequently as Chairman of the Board and strategic advisor to the Company supporting the transition period until Mr. Campanelli’s retirement as an employee on December 31, 2020.

On December 19, 2019, the Company entered into an executive employment agreement with Mr. Coleman, which was effective December 19, 2019 and has a term of three years, to replace his prior agreement, dated December 19, 2016, that expired pursuant to its terms.

On February 19, 2020, the Company entered into a new executive employment agreement with Mr. Coleman in connection with his appointment to President and Chief Executive Officer, which was effective March 6, 2020 and has a term of three years, to replace his prior agreement, dated December 19, 2019.

On February 19, 2020, the Company entered into a new executive employment agreement with Mark Bradley in connection with his appointment to Executive Vice President and Chief Financial Officer, which was effective March 6, 2020 and has a term of three years, to replace his prior agreement, dated November 6, 2018.

On April 28, 2020, the Company entered into an executive employment agreement with Mr. Barry, which was effective April 26, 2020 and has a term of three years, to replace his prior agreement, dated April 26, 2017, that expired pursuant to its terms.

The payments and benefits to be received by each NEO upon certain terminations of employment by each NEO are governed by their various employment agreements and Continuity Compensation arrangements. These payments and benefits and the triggering events are further described in the “Compensation of Executive Officers” section below under the heading “Potential Payments Upon Termination or Change in Control.” Each NEO’s employment agreement contains post-termination restrictive covenants.

 

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The Company also generally enters into a written separation agreement with each of the NEOs upon termination of employment. The purpose of these agreements is to provide the Company with certainty regarding its post-termination protections and obligations. With regard to termination of employment, each separation agreement replaces the employment agreement and thus constitutes the entire agreement between the NEO and the Company regarding post-termination benefits.

Individual Compensation Decisions and Rationale

Key Considerations

Under our compensation structure, the mix of base salary, annual cash incentive compensation and LTI compensation varies depending on each NEO’s level. Annual compensation determinations by the Committee are based on factors including the Company’s performance, individual performance and the competitiveness of each NEO’s pay as reported by the Committee’s consultant, Korn Ferry. Details associated with the Committee’s decisions are set forth in the “Individual Compensation Determination” section.

Other key factors considered by the Committee include NEO ownership levels against the Company’s Ownership Guidelines, as well as share utilization priorities and tax deductibility of compensation. These factors are discussed in further detail below.

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

 

LOGO

Executive and senior management are expected to achieve the Ownership Guidelines within five years of joining the Company. 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 NEOs subject to the Ownership Guidelines are in compliance with the recommended guidelines.

Mr. Campanelli has a sizable personal investment in the success of Endo. Per the terms of Mr. Campanelli’s original employment agreement following the acquisition of Par, Mr. Campanelli was required to purchase or retain shares of Endo stock equal in value to at least fifteen percent (15%) of the after-tax proceeds that he received in connection with the merger. Further, Mr. Campanelli was required to retain shares with a purchase price of $5,000,000 for three years and retain the balance of the shares for one year following his date of employment with Endo. Mr. Campanelli chose to retain substantially more than the aforementioned requirement, and has since made additional open market purchases of Endo stock (allowing him to exceed the Company’s Ownership Guidelines with a current ownership level of 9.7x base salary based on eligible share ownership levels of 2,010,013 shares as of April 13, 2020), strengthening the alignment between management and shareholder interests.

Share Utilization Priorities . The LTI pool is established annually based on the Company’s achievement of goals and objectives, and can vary from year to year. The share pool is also managed in a manner that focuses on optimizing share utilization, while remaining aligned with competitive eligibility and grant practices. Our efforts to proactively manage share utilization and dilution levels in 2019 are demonstrated by the application of management-recommended 20% company-wide LTI reduction factor and issuing only full value PSU and RSU awards to LTI recipients, including the Company’s NEOs. In 2020, our efforts to manage share utilization and underlying dilution levels continued by limiting the use of equity in 2020 and exclusively granting equity to members of the Company’s Executive Leadership Team, which was granted in the form of PSUs. In connection with this decision, the Committee also authorized the use of cash-based LTC awards for all LTI recipients, including the Company’s NEOs, allowing the Company to offer LTI target values that are in line with competitive practices. These combined efforts allowed the Committee to remain aligned with shareholder interests, including encouraging management continuity as required to advance the Company’s strategy. Excluding the LTI award granted to Mr. Coleman in connection with his appointment to CEO described under the “Individual Compensation Determination” section, annual LTI awards for all NEOs accounted for approximately 29.7% of the total expected target value issued to all eligible employees as part of the 2020 annual grant.

 

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Key dilution metrics such as adjusted burn rate and overhang are regularly evaluated against external benchmarks, but also considered in the context of the Company’s current business environment.

 

LOGO

Tax Deductibility of Compensation . Prior to the enactment of the Tax Cuts and Jobs Act of 2017 (the Tax Act) in December 2017, Section 162(m) of the Code precluded 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 a company’s chief financial officer), unless certain specific and detailed criteria are satisfied. However, certain qualifying “performance-based” compensation (that is, 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 Amended and Restated 2015 Stock Incentive Plan) was not subject to the $1.0 million deduction limit.

With the passage of the Tax Act, only qualifying performance-based compensation paid pursuant to a binding written contract in effect on November 2, 2017 (and not modified in any material respect on or after November 2, 2017) as set forth under the Tax Act will be eligible for the deduction exception. The Tax Act also expanded the executive officers covered by Section 162(m) to include the chief financial officer position as well as any person who ever was a covered executive for any prior taxable year, beginning after December 31, 2016. As a result of these changes, starting in 2018, most compensation payable by us to any person who was an NEO of the Company since fiscal year 2016 is non-deductible, regardless of whether the compensation is performance-based.

 

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Individual Compensation Determination

The following summarizes the compensation targets applicable in 2019 and the actual compensation awarded in 2020 by the Committee for the NEOs based on 2019 performance:

 

Name

 

 

Base Salary as of
    December 31, 2019

 

   

2019 Annual
Incentive
Compensation
Target

 

   

2019 Annual

Incentive
Compensation

Actual

 

   

2019 Long-Term
Incentive
Compensation
Target

 

   

 

2019 Long-Term 
Incentive 
Compensation 
Actual (Expected 
Target Value)(1) 

 

 

Paul V. Campanelli

 

$

  950,000

 

 

$

                     1,140,000

 

 

$

  2,010,960

 

 

 

Committee Discretion

 

 

$

  9,000,000 

 

Blaise Coleman

 

$

  615,000

 

 

$

     399,750

 

 

$

                640,106

 

 

$

  2,029,500

 

 

$

  2,100,000 

 

Terrance J. Coughlin

 

$

  641,000

 

 

$

     448,700

 

 

$

     682,671

 

 

$

  2,243,500

 

 

$

  2,743,500 

 

Matthew J. Maletta

 

$

  600,000

 

 

$

     360,000

 

 

$

     568,360

 

 

$

  1,800,000

 

 

$

  2,300,000 

 

Patrick Barry

 

$

  436,000

 

 

$

     239,800

 

 

$

     397,005

 

 

$

     872,000

 

 

$

                1,372,000 

 

 

(1)

Award levels established at the time of grant are based on expected target value, which, in the case of the 2019 equity-based awards issued in 2020, is derived from Endo’s closing share price at the time of grant for PSUs (see Summary Compensation Table’s footnote (2) for details regarding valuations under ASC 718 for the equity-based portion of LTI for accounting and proxy reporting purposes). As further described below, based on Mr. Campanelli’s 2019 performance, the Committee approved an award for Mr. Campanelli with an expected target value of $9,000,000 (comprised of 978,260 PSUs, with the remainder of the award granted in the form of LTC awards) during the annual grant cycle in 2020.

Each NEO’s target percentage and actual number of PSUs granted in 2020, based on 2019 performance, were as follows:

 

Name

 

  

 

LTI Target % of
Base Salary

 

    

 

PSUs Actually
Granted

 

 

Paul V. Campanelli

     Committee Discretion        978,260  

Blaise Coleman

     330%        228,260  

Terrance J. Coughlin

     350%        298,206  

Matthew J. Maletta

     300%        250,000  

Patrick Barry

     200%        149,130  

 

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Paul V. Campanelli

Chairman, Chief Executive Officer and President

 

 

    

 

 

 

On November 4, 2019, Endo announced that Mr. Campanelli notified the Board of his intention to retire. In connection with Mr. Campanelli’s retirement, the Committee implemented its Chief Executive Officer succession plan and, on December 12, 2019, approved a Letter Agreement with Mr. Campanelli, which governs the terms and conditions of his compensation during the succession planning and transition period until Mr. Campanelli’s retirement as an employee on December 31, 2020. The Letter Agreement provides that Mr. Campanelli will continue to receive his current base salary of $950,000 through December 31, 2020, with Mr. Campanelli remaining eligible to receive annual and long-term incentive compensation in 2020 for 2019 performance, as set forth in Mr. Campanelli’s Employment Agreement with Endo Health Solutions Inc., dated April 24, 2019. The section below describes the process followed by the Committee in determining appropriate incentive compensation levels for Mr. Campanelli. On March 6, 2020, Mr. Blaise Coleman succeeded Mr. Campanelli as President and Chief Executive Officer.

 

The information used to determine the compensation recommendation for the President and Chief Executive Officer is developed by Korn Ferry. Korn Ferry prepares analyses showing competitive Chief Executive Officer compensation among the Pay Comparator Companies and secondary executive compensation survey sources specific to the pharmaceutical industry 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, LTI grant value and mix. The recommendations primarily 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 performance of both the Company and 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 when he discusses his personal performance and the Company’s 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. Campanelli’s performance was based on the successful development and advancement of Endo’s strategic imperatives, the Company’s strong financial results and the achievement of operating performance objectives. Mr. Campanelli’s performance was evaluated based upon the Company’s overall financial performance and the achievement of annual strategic, operating and compliance objectives established for 2019. Specifically, the Committee strongly considered the Company’s financial and operating objectives as summarized in the “Executive Summary” section in CD&A and further detailed within the “Performance-Based Annual Cash Incentive Compensation” section. In addition, the Committee considered Mr. Campanelli’s performance based upon his successful execution against the multi-year turnaround plan established following Mr. Campanelli’s appointment in late 2016 and the progress made in executing the transformation of Endo based on the Company’s new strategy built on organic growth and portfolio optimization, the investments initiated in progressing the Company’s growth assets and the advancement of a more efficient cost structure and operating model focused on operational execution.

 

The Committee assessed Mr. Campanelli’s achievement against the Company’s annual pre-established and formulaic objectives, while operating within the structure of Endo’s annual incentive compensation 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. In consideration of Mr. Campanelli’s individual performance and contributions in 2019 and the Company’s performance against the 2019 scorecard objectives, Mr. Campanelli was awarded an annual performance-based bonus equal to approximately 176.4% of his annual incentive compensation target. The 2019 annual incentive award reflects the Board’s continued confidence in Mr. Campanelli and his ability to lead the organization through the execution of key financial, operational and strategic priorities.

 

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

 

LOGO

 

When Mr. Campanelli entered into a new employment agreement with the Company on April 24, 2019, his agreement did not prescribe a specific LTI target, but instead provided for his LTI compensation to be determined at the sole discretion of the Committee based upon several performance-based criteria.

 

 

 

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Paul V. Campanelli

Chairman, Chief Executive Officer and President (continued)

 

    

    

 

 

Mr. Campanelli’s performance in 2019 was assessed by the Committee based on a collective group of factors focused on strategic, financial and operational results, which reflects current year performance and drives the Company’s future success as a highly focused specialty branded and generics pharmaceutical company. Based on Korn Ferry’s analysis of competitive LTI levels, and in consideration of Mr. Campanelli’s outstanding performance, the Committee approved an LTI award with an expected target value based on Endo’s closing share price at the time of the 2020 annual grant equal to $9,000,000. See Summary Compensation Table’s footnote (2) for details regarding valuations under ASC 718 for the equity-based portion of LTI for accounting and proxy reporting purposes.

 

Consistent with Endo’s other NEOs, Mr. Campanelli’s 2020 LTI award was issued in the form of performance-based equity and an LTC award, each comprising 50% of his total LTI award. The performance-based equity consisted of PSUs with realizable value dependent upon the delivery of shareholder value and achievement of Adjusted Free Cash Flow objectives over a cumulative three-year performance period. The combined use of PSUs and LTC awards in 2020 supported the Company’s share pool management priorities, and also allowed for a consistent approach for all executive management employees aimed at allocating a significant portion of the award in the form of performance-based LTI. This grant was approved in recognition of Mr. Campanelli’s overall performance relative, but not limited to, the factors adopted by the Committee for all applicable NEO LTI assessments (as referenced under the section “Long-Term Incentive Compensation”).

 

Mr. Campanelli’s LTI award and overall total Direct Compensation levels and pay mix were considered in the context of competitive practices among CEOs of both Endo’s Pay Comparator Companies and ISS Peer Group (2019 target Direct Compensation levels ranked below the 25th percentile compared to the Endo Pay Comparator Companies, and below the 50th percentile compared to the ISS Peer Group median) . Notwithstanding the Committee’s decision to issue LTC awards to all NEOs in 2020 in response to shareholder feedback to minimize share utilization and dilution levels during periods when Endo shares are trading at a significantly reduced share price, Endo’s customary CEO pay structure supports the Company’s pay-for- performance compensation philosophy in that only 8.6% of the expected target value of total Direct Compensation is fixed while 91.4% is variable and dependent upon performance (excluding the Transition Compensation arrangements in connection with Mr. Campanelli’s Letter Agreement as described below). The Company’s pay-for-performance compensation philosophy will be carried forward under the CEO compensation arrangement for Blaise Coleman, which will allocate approximately 10.9% of the expected target value of total Direct Compensation toward fixed compensation, while 89.1% will be variable and dependent upon performance (anticipating that equity-based LTI will be used in the future based on Endo’s customary practice).

 

 

LOGO

 

 
 

As set forth in the Letter Agreement, Mr. Campanelli will also be eligible to receive an annual cash bonus for 2020 based on a target level equal to 150% of base salary, subject to achievement of certain performance targets. In addition, Mr. Campanelli is eligible to receive an aggregate amount of $3,500,000 (the Transition Compensation) in consideration for: (i) his agreement to continue to serve as the Company’s Chief Executive Officer and President until a successor was appointed and (ii) his assistance in supporting an orderly succession planning and transition process through the end of 2020. Of the $3,500,000 of Transition Compensation, $1,500,000 was earned in December 2019 and $1,000,000 will be earned in each of June and December 2020. The arrangements noted in the Letter Agreement were offered in lieu of: (i) severance payments entitled under Mr. Campanelli’s Executive Employment Agreement; (ii) receiving a long-term incentive award in 2021 for 2020 performance based on the Company’s customary practice; and (iii) board compensation for service in 2020 as a board member and serving as Chairman of the Board of Directors. Following the Succession Planning and Transition Period and Mr. Campanelli’s retirement as a non-management employee on December 31, 2020, Mr. Campanelli will receive non-employee board compensation and/or fees for services as Chairman of the Board of Directors with the commencement of the 2021 annual board compensation cycle beginning on January 1, 2021.

 

 

 

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Blaise Coleman

Executive Vice President and Chief Financial Officer

 
 

 

Mr. Coleman has served as Executive Vice President and Chief Financial Officer since December 19, 2016 and also oversees the Company’s information technology function. Mr. Coleman has broad-based leadership skills, financial expertise and business acumen related to strategic and financial matters. Through Mr. Coleman’s strong financial management, the Company ended the year with Adjusted Revenue of $2.910 billion, Adjusted EBITDA Margin of 45.1% and Adjusted Diluted EPS from Continuing Operations of $2.37. Throughout 2019, Mr. Coleman played a key leadership role in executing Endo’s strategic priorities, including the management of capital expenditure investments supporting the Company’s key growth drivers and the management of the Company’s debt commitments. Mr. Coleman also continued to lead the efforts to optimize the Company’s cost structure and expand margins, effectively managing operating expenses and approved commercial and R&D reinvestments. In consideration of Mr. Coleman’s contributions and the Company’s performance against the 2019 scorecard objectives, Mr. Coleman was awarded an annual performance-based bonus equal to approximately 160% of his annual incentive compensation target. Based on the performance factors noted under Executive Compensation Program—Long-Term Incentive Compensation—Considerations, Mr. Coleman was also awarded an annual LTI award equal to 103% of his LTI target, with 50% of the award granted in the form of PSUs, and the remaining 50% granted in the form of LTC awards to manage share pool utilization levels in 2020. In connection with Mr. Coleman’s appointment to President and Chief Executive Officer on March 6, 2020, the Committee approved a base salary level of $850,000, and increased Mr. Coleman’s 2020 performance-based annual cash incentive compensation target to 100%. Mr. Coleman’s new employment agreement does not prescribe a specific LTI target, but instead provides for his LTI compensation to be determined at the sole discretion of the Committee based on the performance factors noted above. In addition to the annual LTI award noted above equal to a target grant value of $2,100,000, and received in connection with Mr. Coleman’s performance in 2019 in the capacity of Executive Vice President and Chief Financial Officer, Mr. Coleman was awarded a long-term incentive compensation award on March 6, 2020 equal to a target grant value of $4,000,000 in connection with his appointment to CEO. Similar to the annual LTI award, 50% of this award was granted in the form of PSUs, and the remaining 50% was granted in the form of LTC awards to manage share pool utilization levels in 2020. The combination of the annual LTI award and CEO LTI grant amounted to a total target grant value of $6,100,000. Based on this aggregate LTI target grant value, in addition to the base salary and annual cash incentive compensation target noted above, Mr. Coleman’s target 2020 total direct compensation value is equal to $7,800,000. On March 6, 2020, Mr. Mark Bradley succeeded Mr. Coleman as Executive Vice President and Chief Financial Officer.

 

 

 

 

Terrance J. Coughlin

Executive Vice President and Chief Operating Officer

 
 

 

Mr. Coughlin has served as Endo’s Executive Vice President and Chief Operating Officer since November 1, 2016, with responsibility for global research & development and worldwide manufacturing operations. Previously, Mr. Coughlin served as Vice President, Operations of Par Pharmaceutical Companies, Inc., a subsidiary of Endo. Prior to Endo’s acquisition of Par in September 2015, Mr. Coughlin was the Chief Operating Officer of Par Pharmaceutical Companies, Inc. where he was responsible for leading Par’s manufacturing operations, product development and supply operations. Throughout 2019, Mr. Coughlin played a key leadership role in the strategic and operational oversight of the successful implementation of Endo’s CCH for the treatment of cellulite in the buttocks program, executing activities leading to the BLA filing and acceptance by the FDA in November 2019, and advancing the product supply implementation plan in preparation for the anticipated second half 2020 FDA approval of the BLA. Under Mr. Coughlin’s leadership, the organization achieved 14 new product launches, progressed high-value generic regulatory filings based on commercial viability determinations and operationalized R&D capabilities in India. Based on Korn Ferry’s analysis of the competitiveness of Mr. Coughlin’s pay related to Endo’s Pay Comparator Companies, and in recognition of Mr. Coughlin’s performance and contributions in 2019, the Committee approved an increase to Mr. Coughlin’s base salary of approximately 2.6%, effective February 24, 2020. Based on individual performance and Company performance against 2019 scorecard objectives, Mr. Coughlin was awarded an annual performance-based bonus equal to approximately 152% of his annual incentive compensation target. Based on the performance factors noted under Executive Compensation Program—Long-Term Incentive Compensation—Considerations, Mr. Coughlin was also awarded an annual LTI award equal to 122% of his LTI target, with 50% of the award granted in the form of PSUs, and the remaining 50% granted in the form of LTC awards to manage share pool utilization levels in 2020.

 

 

 

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Matthew J. Maletta

Executive Vice President, Chief Legal Officer

 
 

 

Mr. Maletta has served as the Company’s Executive Vice President, Chief Legal Officer since May 4, 2015. Mr. Maletta has over two decades of legal experience and organizational leadership in the specialty pharmaceutical industry and with private law firms, including extensive experience in litigation strategy, M&A, corporate, governance, securities, antitrust, finance, commercial and employment law. Throughout 2019, Mr. Maletta played a key leadership role in developing and supporting the advancement of the Company’s overall strategy, which included both legal and operational priorities. Specifically, Mr. Maletta led and advanced the Company’s litigation strategy while providing leadership and advice on a wide range of other significant legal and business matters, including commercial, intellectual property, regulatory, corporate, investor and media relations. Based on Korn Ferry’s analysis of the competitiveness of Mr. Maletta’s pay related to Endo’s Pay Comparator Companies, and in recognition of Mr. Maletta’s performance and contributions in 2019 and expanded role in 2020, the Committee approved an increase to Mr. Maletta’s base salary of approximately 8.3%, effective February 24, 2020. Based on individual performance and Company performance against 2019 scorecard objectives, Mr. Maletta was awarded an annual performance-based bonus equal to approximately 158% of his annual incentive compensation target. Based on the performance factors noted under Executive Compensation Program—Long-Term Incentive Compensation—Considerations, Mr. Maletta was also awarded an annual LTI award equal to 128% of his LTI target, with 50% of the award granted in the form of PSUs, and the remaining 50% granted in the form of LTC awards to manage share pool utilization levels in 2020.

 

 

 

 

Patrick Barry

Executive Vice President and Chief Commercial Officer, U.S. Branded Business

 
 

 

Mr. Barry has served as the Company’s Executive Vice President and Chief Commercial Officer, U.S. Branded Business since February 28, 2018, leading the Branded Pharmaceuticals segment since December 21, 2016. In this role, he has responsibility for all commercial activities, including strategy, new product planning, marketing, sales as well as managed care and patient access responsibilities. Throughout 2019, Mr. Barry played a key leadership role in the strategic and operational oversight of the successful implementation of Endo’s CCH for the treatment of cellulite in the buttocks program, executing multiple commercial launch readiness activities in preparation for an anticipated second half 2020 FDA approval of the BLA. Under Mr. Barry’s leadership, Specialty Products grew approximately 17% in 2019, with the XIAFLEX ® franchise growing approximately 24% versus prior year. Based on Korn Ferry’s analysis of the competitiveness of Mr. Barry’s pay related to Endo’s Pay Comparator Companies, and in recognition of Mr. Barry’s performance and contributions in 2019 and expanded role in 2020, the Committee approved an increase to Mr. Barry’s base salary of approximately 14.7%, effective February 24, 2020. Based on individual performance and Company performance against 2019 scorecard objectives, Mr. Barry was awarded an annual performance-based bonus equal to approximately 166% of his annual incentive compensation target. Based on the performance factors noted under Executive Compensation Program—Long-Term Incentive Compensation—Considerations, Mr. Barry was also awarded an annual LTI award equal to 157% of his LTI target, with 50% of the award granted in the form of PSUs, and the remaining 50% granted in the form of LTC awards to manage share pool utilization levels in 2020. Effective in April 2020, Mr. Barry was appointed as Executive Vice President and President, Global Commercial Operations. In connection with Mr. Barry’s promotion, the Committee approved a base salary level of $550,000 and increased Mr. Barry’s 2020 performance-based annual cash incentive compensation target to 60% and long-term incentive target to 250%.

 

 

 

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Table of Contents

Compensation of Executive Officers

Summary Compensation Table

The following table sets forth the cash and non-cash compensation paid to or earned by our President and Chief Executive Officer, Executive Vice President and Chief Financial Officer and the other three most highly compensated executive officers of the Company who were serving as executive officers at the end of the last completed fiscal year (collectively, the NEOs). Information for each NEO is included for each of the years ending December 31, 2019, 2018 and 2017 in which that individual met the definition of an NEO. 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

($)(1)

 

   

Share
Awards
($)(2)

 

   

Option
Awards
($)(2)

 

   

 

Non-Equity
Incentive Plan
Compensation
($)(3)

 

   

All Other
Compensation
($)(4)

 

   

Total ($)

 

 

 

Paul V. Campanelli
Chairman, Chief Executive Officer and President

 

 

 

 

2019

2018

2017

 

 

 

 

 

 

$

$

$

 

950,000

913,462

950,000

 

 

 

 

 

 

$

$

$

 

  1,500,000

 

 

 

 

 

 

$

$

$

 

8,631,243

  12,928,700

7,783,028

 

 

 

 

 

 

$

$

$

 

3,857,212

2,996,836

 

 

 

 

 

 

$

$

$

 

  2,010,960

2,231,550

1,815,450

 

 

 

 

 

 

$

$

$

 

  26,078

39,779

57,081

 

 

 

 

 

 

$

$

$

 

  13,118,281

19,970,703

13,602,395

 

 

 

 

 

Blaise Coleman
Executive Vice President and Chief Financial Officer

 

 

 

 

 

2019

2018

2017

 

 

 

 

 

 

$

$

$

 

612,115

569,231

545,833

 

 

 

 

 

 

$

$

$

 

625,000

165,000

 

 

 

 

 

 

$

$

$

 

1,672,726

1,256,858

1,661,589

 

 

 

 

 

 

$

$

$

 

1,360,469

 

 

 

 

 

 

$

$

$

 

640,106

806,188

613,203

 

 

 

 

 

 

$

$

$

 

21,701

3,385

4,417

 

 

 

 

 

 

$

$

$

 

3,571,648

2,635,662

4,350,511

 

 

 

 

 

Terrance J. Coughlin
Executive Vice President and Chief Operating Officer

 

 

 

 

2019

2018

2017

 

 

 

 

 

 

$

$

$

 

637,923

597,115

600,000

 

 

 

 

 

 

$

$

$

 

625,000

 

 

 

 

 

 

$

$

$

 

2,064,064

1,659,967

2,214,791

 

 

 

 

 

 

$

$

$

 

  1,655,854

 

 

 

 

 

 

$

$

$

 

682,671

868,672

800,125

 

 

 

 

 

 

$

$

$

 

8,647

3,692

5,000

 

 

 

 

 

 

$

$

$

 

4,018,305

3,129,446

5,275,770

 

 

 

 

 

Matthew J. Maletta
Executive Vice President and Chief Legal Officer

 

 

 

 

2019

2018

2017

 

 

 

 

 

 

$

$

$

 

  595,192

549,038

543,333

 

 

 

 

 

 

$

$

$

 

625,000

 

 

 

 

 

 

$

$

$

 

1,606,932

1,255,826

1,638,825

 

 

 

 

 

 

$

$

$

 

1,347,982

 

 

 

 

 

 

$

$

$

 

568,360

707,781

600,203

 

 

 

 

 

 

$

$

$

 

33,152

38,482

26,991

 

 

 

 

 

 

$

$

$

 

3,428,636

2,551,127

4,157,334

 

 

 

 

 

Patrick Barry
Executive Vice President and Chief Commercial Officer, U.S. Branded Business

 

 

 

 

 

2019

 

 

 

 

$

 

433,885

 

 

 

 

$

 

625,000

 

 

 

 

$

 

785,269

 

 

 

 

$

 

 

 

 

 

$

 

397,005

 

 

 

 

$

 

16,646

 

 

 

 

$

 

2,257,805

 

 

 

(1)

The amounts in 2019 include the amount Mr. Campanelli earned in 2019 related to the Transition Compensation payment and the amounts Messrs. Coleman, Coughlin, Maletta and Barry earned related to the Continuity Compensation payments implemented by the Compensation Committee to address shareholder concerns relating to the preservation of management continuity. These payments are further discussed in the CD&A section above.

(2)

The amounts shown in these columns represent the grant date fair value of the awards granted in 2019, 2018 and 2017, determined in accordance with ASC 718. During the periods presented above, equity awards granted included both option awards (in 2018 and 2017) and share awards (in all periods presented), including market-based PSUs measured based on the Company’s TSR (referred to as TSR-based PSUs), performance-based PSUs measured based on the Company’s Adjusted Free Cash Flow performance (referred to as FCF-based PSUs) and RSUs. Option awards are valued using a Black-Scholes valuation model. TSR-based PSUs are valued using a Monte-Carlo variant valuation model that takes into account a variety of potential future share prices for Endo as well as our peer companies in a selected market index. FCF-based PSUs are valued taking into consideration the probability of achieving the specified performance goal. RSUs are valued based on the closing price of Endo’s ordinary shares on the date of grant. Refer to the “Share-Based Compensation” footnotes in our audited financial statements included in the Endo International plc Annual Reports on Form 10-K for 2019, 2018 and 2017 for the assumptions used in valuing and expensing these awards in accordance with ASC 718. Share awards and option awards that have been issued subject to shareholder approval are considered to have been granted in the period in which such approval is received. The determination of the grant-date(s) underlying FCF-based PSUs depends in part on the date(s) on which each of the performance targets with respect to those PSUs are approved. For example, although FCF-based PSUs are generally only released at the end of a three-year vesting period, the number of ordinary shares earned for FCF-based PSUs issued prior to 2019 is determined based on performance during three successive one-year performance periods for which each year’s performance target is generally established during the first quarter of that year. Therefore, a single FCF-based PSU may give rise to multiple grant dates depending, in part, on the dates on which the respective performance targets are approved. The grant dates for the Company’s outstanding FCF-based PSUs are set forth in the following table.

 

     

  Date
  FCF-Based
  PSU Award
  was

  Issued

 

 

  Performance Period(s) Underlying FCF-Based PSU

  Award

  Grant Dates with Respect to the Performance Periods
Ending December 31,
 
  2017     2018     2019     2020     2021     2022  

 

21-Feb 17

 

 

 

Calendar years 2017-2019 (separate one-year periods)

 

 

 

 

21-Feb 17

 

 

 

 

 

 

01-Mar 18

 

 

 

 

 

 

08-Mar 19

 

 

     

 

02-Apr 18

 

 

 

Calendar years 2018-2020 (separate one-year periods)

   

 

 

 

02-Apr 18

 

 

 

 

 

 

08-Mar 19

 

 

 

 

 

 

19-Feb 20

 

 

   

 

31-Jul 18

 

 

 

Calendar years 2018-2020 (separate one-year periods)

   

 

 

 

31-Jul 18

 

 

 

 

 

 

08-Mar 19

 

 

 

 

 

 

19-Feb 20

 

 

   

 

29-Mar 19

 

 

 

Calendar years 2019-2021 (one three-year period)

         

 

 

 

29-Mar 19

 

 

 

 

31-Mar 19

 

 

 

Calendar years 2019-2021 (one three-year period)

         

 

 

 

31-Mar 19

 

 

 

 

06-Mar 20

 

 

 

Calendar years 2020-2022 (one three-year period)

           

 

 

 

06-Mar 20

 

 

 

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Table of Contents

For additional information on the current year amounts included in the Summary Compensation Table, refer to the “2019 Grants of Plan-Based Awards” table below.

(3)

The amounts shown in this column represent cash amounts earned pursuant to the Company’s annual incentive compensation program with respect to 2019, 2018 and 2017 performance. These amounts were approved by the Compensation Committee on February 19, 2020, February 14, 2019 and February 13, 2018, respectively.

(4)

The amounts shown in this column for 2019 include the items summarized in the table that follows:

 

Name

 

 

Perquisites &
Other Personal
Benefits(a)

 

   

 

Registrant
Contributions to
Defined
Contribution
Plans(b)

 

   

Life Insurance
Premiums(c)

 

   

Other(d)

 

   

Total

 

 

Paul V. Campanelli

 

$

12,866

 

 

$

8,769

 

 

$

                     2,860

 

 

$

                     1,583

 

 

$

              26,078

 

Blaise Coleman

 

$

16,139

 

 

$

5,562

 

 

$

 

 

$

 

 

$

21,701

 

Terrance J. Coughlin

 

$

2,853

 

 

$

5,794

 

 

$

 

 

$

 

 

$

8,647

 

Matthew J. Maletta

 

$

21,952

 

 

$

11,200

 

 

$

 

 

$

 

 

$

33,152

 

Patrick Barry

 

$

5,446

 

 

$

11,200

 

 

$

 

 

$

 

 

$

16,646

 

 

  (a)

Amounts for Messrs. Coleman and Maletta include $11,734 and $16,022, respectively, for financial and/or legal services. Amounts for Messrs. Campanelli, Coleman and Coughlin include $2,476, $3,950 and $2,398, respectively, for costs associated with executive physicals. Amounts for Messrs. Campanelli, Coleman, Coughlin, Maletta and Barry include $10,390, $455, $455, $5,930 and $5,446, respectively, for the incremental cost of spousal travel and attendance, and certain costs related to participant attendance, at certain Endo-sponsored events and meetings where the executives’ attendance was requested by the Company.

  (b)

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

  (c)

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

  (d)

Represents annual premiums paid by the Company for executive long-term disability benefits.

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 CD&A section above.

 

47


Table of Contents

2019 Grants of Plan-Based Awards

The following table summarizes grants of plan-based awards made to the NEOs, including grants made under the Amended and Restated 2015 Stock Incentive Plan, during the year ended December 31, 2019.

 

                 
               

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)

 

 

  Name

 

 

Grant
Date(1)

 

   

Action
Date(1)

 

   

Threshold
($)

 

   

Target
($)

 

   

Maximum
($)

 

   

Threshold
(#)

 

   

Target
(#)

 

   

Maximum
(#)

 

 

 

Paul V. Campanelli

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

             —

 

 

 

 

$

 

1,140,000

 

 

 

 

$

 

2,565,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

08-Mar 19

 

 

 

21-Feb 17

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

37,909

 

 

 

75,818

 

 

 

 

 

 

 

 

$

 

 

$

327,913

 

 

 

08-Mar 19

 

 

 

13-Feb 18

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

50,000

 

 

 

100,000

 

 

 

 

 

 

 

 

$

 

 

$

432,500

 

 

 

08-Mar 19

 

 

 

31-Jul 18

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

16,137

 

 

 

32,274

 

 

 

 

 

 

 

 

$

 

 

$

139,585

 

 

 

31-Mar 19

 

 

 

31-Mar 19

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

448,318

 

 

 

896,636

 

 

 

 

 

 

 

 

$

 

 

$

4,131,251

 

 

 

 

31-Mar 19

 

 

 

 

 

 

31-Mar 19

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$