Exhibit 10.1

SEPARATION AGREEMENT AND RELEASE
 
This Separation Agreement and Release ("Separation Agreement") is entered into
by and between Peter A. Lankau ("Executive" or "you") and Endo Pharmaceuticals
Holdings Inc. (the "Company"), and confirms the agreement that has been reached
with you in connection with your resignation from the Company.
 
1.           Termination of Employment.  You agree that your resignation shall
be effective as of March 1, 2008 (the "Separation Date") and as of such date you
shall cease to be employed by the Company in any capacity and you shall resign
from all executive positions you then hold with the Company and its
subsidiaries.  Your resignation as a member of the Board of Directors of the
Company (as well as of the Board of Directors of any of the Company's
subsidiaries) shall be effective immediately.  The Company hereby waives the 30
days’ prior notice requirement in accordance with Section 6.1 of your Amended
and Restated Employment Agreement dated as of December 19, 2007 (the "Employment
Agreement").  You further agree to execute any additional documents necessary to
effectuate the foregoing.
 
2.           Separation Pay and Benefits.  In consideration of your execution of
this Separation Agreement and your compliance with its terms and conditions, the
Company agrees to pay or provide you (subject to the terms and conditions set
forth in this Separation Agreement) with the benefits described in this
paragraph 2 and to adhere to the nondisparagement restrictions set forth in
paragraph 4b below, which exceed any payment and benefits to which you are
otherwise entitled.  The benefits below shall be in full satisfaction of its
obligations under the terms of the Employment Agreement and all applicable cash
or equity incentive compensation plans and agreements.
 
a.           The Company shall continue to pay you at your current rate of base
salary and benefits through March 1, 2008, in accordance with the Company's
payroll practices.
 
b.           The Company shall pay you an aggregate of $1,939,200 (the
"Separation Amount"), which represents two times the sum of (i) your current
annual base salary ($606,000) and (ii) your target incentive compensation for
the fiscal year in which the Separation Date occurs (60% of salary).  The
Separation Amount shall be paid within 30 days following the Effective Date (as
defined below).  There shall be deducted from the payment of the Separation
Amount all applicable federal, state and local withholding taxes and other
appropriate deductions.  Notwithstanding the foregoing, in the event that the
Effective Date does not occur by March 1, 2008, the Separation Amount shall not
be paid pursuant to the Separation Agreement.
 
c.           The Company shall provide you with continued coverage under the
Company's group medical insurance at the cost in effect at the Separation Date
for a period of twenty-four (24) months following the Separation Date; provided
that, to the extent you become eligible for medical insurance from a subsequent
employer, the Company’s medical insurance shall become secondary to such
subsequent employer’s medical insurance.  The health plan continuation coverage
period provided for under the Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) shall commence at the end of such 24 month period. In addition, the
Company shall provide you with continued life insurance benefits for a period of
twenty-four (24) months following the Separation Date.
 
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d.           The parties acknowledge and agree that you are party to Stock
Option Agreements (the "Option Agreements") under which you have been granted
stock options to purchase shares of common stock of the Company (the "Options")
pursuant to the terms of the Endo Pharmaceuticals Holdings Inc. 2000 Stock
Incentive Plan or the Endo Pharmaceuticals Holdings Inc. 2004 Stock Incentive
Plan, as applicable (the "Stock Incentive Plans"), as follows:
 
Grant Date
Vested Options
as of 2/25/08
Unvested Options
Exercise Price
Remaining vesting dates (out of 4)
2/21/07
43,750
131,250
$30.55
2/22/09, 2/21/10 & 2/24/11
2/14/06
125,000
125,000
$28.61
2/14/09 & 2/14/10
4/27/05
125,000
125,000
$20.22
4/27/08 & 4/27/09
8/11/04
19,138
6,379
$16.47
8/11/08

 
        (i)           The Company also agrees that the 6,379 unvested Options
originally granted to you on August 11, 2004 and the 125,000 unvested Options
originally granted to you on April 27, 2005 shall become fully vested and
exercisable as of the Separation Date.
 
(ii)           The Company agrees that, in accordance with, and subject to, the
terms and conditions of the Option Agreements, you shall be entitled to exercise
all vested Options held by you as of the Separation Date (including those that
become vested in accordance with paragraph 2d.(i) above) until the earlier to
occur of the first anniversary of the Separation Date or the original expiration
date of the Options as set forth in the Stock Incentive Plans or applicable
Option agreements. 
 
e.           The Company shall pay you incentive compensation for 2007 equal
to $300,000 when in 2008 bonuses for such year are paid to other executives of
the Company.
 
f.           The Company shall pay you, within 30 days following the Effective
Date, an additional $60,000 for office transition services.  The Company shall
promptly pay in 2008, upon presentation of invoices, your legal counsel’s
reasonable fees in connection with this Agreement, provided that the cost of
such legal fees shall not exceed $30,000.
 
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g.           The Company's obligation to make the payments and to provide the
benefits set forth in paragraphs 2d.(i), 2e. and 2f above shall cease as of the
date of any material breach of your obligations under the covenants set forth in
paragraphs 4, 5, and 6 hereof, provided such breach is not cured within 30 days
of the date the Company delivers you written notice notifying of such breach.
 
3.           Accrued Benefits.  Whether or not you execute this Separation
Agreement, you will be paid for any accrued but unused vacation days, and for
unreimbursed business expenses (in accordance with usual Company policies and
practices, and in no event later than the calendar year following the year in
which the expenses are incurred), to the extent not theretofore paid.  In
addition, following the Separation Date, you will be entitled to receive vested
amounts payable to you under the Company's 401(k) plan and other retirement and
deferred compensation plans in accordance with the terms of such plans and
applicable law.  Except as specifically set forth herein, your participation in
all Company plans shall remain subject to the terms and conditions of such plans
as in effect from time to time and you agree that such terms and conditions are
binding on you and the Company.
 
4.           Nondisparagement.
 
a.           You agree that you will not, with intent to damage, disparage or
encourage or induce others to disparage any of the Company, its subsidiaries and
affiliates, together with all of their respective past and present directors and
officers, as well as their respective past and present managers, officers,
shareholders, partners, employees, agents, attorneys, servants and customers and
each of their predecessors, successors and assigns (collectively, the "Company
Entities and Persons"); provided that such limitation shall extend to past and
present managers, officers, shareholders, partners, employees, agents,
attorneys, servants and customers only in their capacities as such or in respect
of their relationship with the Company and its affiliates.
 
b.           The Company agrees that neither the Company formally nor any
director or officer, with intent to damage you, will disparage you or encourage
or induce others to disparage you.
 
c.           For the purposes of this Separation Agreement, the term "disparage"
includes, without limitation, comments or statements adversely affecting in any
manner (i) the conduct of the business of the Company Entities and Persons or
yours or (ii) the business reputation of the Company Entities and Persons or
yours.  Nothing in this Separation Agreement is intended to or shall prevent
either party from providing, or limiting testimony in response to a valid
subpoena, court order, regulatory request or other judicial, administrative or
legal process or otherwise as required by law.
 
5.           Cooperation in Any Investigations and Litigation.
 
a.           The parties agree that they will reasonably cooperate with each
other, and their respective counsel, in connection with any investigation,
inquiry, administrative proceeding or litigation relating to any matter in which
you were involved or of which you have knowledge as a result of your service
with the
 
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Company by providing truthful information, provided that in your case, such
cooperation does not unreasonably interfere with your then current professional
and personal commitments.  The Company agrees to promptly reimburse you for
reasonable expenses reasonably incurred by you, in connection with your
cooperation pursuant to this paragraph.  Such expenses shall include reasonable
legal fees of separate counsel in the event of an actual or potential conflict
of interest, provided that (i) such selection of counsel shall be subject to the
prior approval of the Company, which approval shall not be unreasonably
withheld, (ii) the scope of such representation shall be subject to the prior
approval of the Company which approval shall not be unreasonably withheld, and
(iii) such reimbursement of legal fees shall not exceed $100,000 in any one year
(which limitation shall not, however, apply to limit any of your existing rights
you may have to indemnification or under the applicable directors and officers
liability insurance).
 
b.           You agree that, in the event you are subpoenaed or otherwise
required by any person or entity (including, but not limited to, any government
agency) to give testimony or produce documents (in a deposition, court
proceeding or otherwise) which in any way relates to your employment by the
Company, you will, to the extent not legally prohibited from doing so, give
prompt notice of such request to the General Counsel of the Company so that the
Company may contest the right of the requesting person or entity to such
disclosure before making such disclosure.  Nothing in this provision shall
require you violate your obligation to comply with valid legal process.
 
6.           Confidentiality; Non-Competition and Non-Interference.  You
acknowledge and agree that you continue to be bound by the confidentiality,
non-competition and non-interference covenants set forth in Articles VII and
VIII of the Employment Agreement as modified below, and the Company shall
continue to be entitled to the benefits of Section 9.1 of the Employment
Agreement, and such provisions shall survive the termination of the Employment
Agreement.  The parties agree that the provisions of Article VIII shall not be
violated unless you are providing services  to the portion of a business whose
prescription pharmaceutical products compete in whole or in part with the
Company’s currently marketed products and/or the following products that are
currently in development, for those indications currently being pursued:
fentanyl, ketoprofen, sufentanil, N-acetyl cysteine, doxepine, and any marketed
or development products that the Company acquires or licenses as a result of any
discussions that are ongoing as of the date of this Agreement which discussions
conclude in a definitive agreement executed within one year of the Separation
Date; and that there shall be no limitation on you providing services to other
portions of such entities.
 
7.           Indemnification.  You shall be indemnified to the extent  permitted
by applicable laws, if you are made a party, or are threatened to be made a
party, to any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in connection with acts or omissions occurring
during your tenure with the Company, as provided under Section 2.4 of the
Employment Agreement, and such provision shall survive the termination of the
Employment Agreement and your employment, such indemnification shall include the
advancement of legal fees in accordance with the terms
 
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and conditions set forth in the Charter and the By-Laws of the Company.  The
level of directors and officers insurance coverage shall not be less than that
maintained time to time for active directors and officers.
 
8.           Waiver.
 
a.           You agree that, in consideration of the benefits to be provided to
you under this Separation Agreement, you hereby waive, release and forever
discharge any and all claims and rights which you ever had, now have or may have
against the Company and any of its subsidiaries or affiliated companies, and
their respective successors and assigns, current and former officers, agents,
board of directors members, representatives and employees, various benefits
committees, and their respective successors and assigns, heirs, executors and
personal and legal representatives, based on any act, event or omission
occurring before you execute this Separation Agreement arising out of, during or
relating to your employment or services with the Company or the termination of
such employment or services, except as provided below.  This waiver and release
includes, but is not limited to, any claims which could be asserted now or in
the future, under: common law, including, but not limited to, breach of express
or implied duties, wrongful termination, defamation, or violation of public
policy; any policies, practices, or procedures of the Company; any federal or
state statutes or regulations including, but not limited to, Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq., the Civil Rights
Act of 1866 and 1871, the Americans With Disabilities Act, 42 U.S.C. §12101 et
seq., the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §1001 et
seq. (excluding those rights relating exclusively to employee pension benefits
as governed by ERISA), the Family and Medical Leave Act, §2601 et. seq., any
comparable state laws, any contract of employment, express or implied; any
provision of the United States or of a state; any provision of any other law,
common or statutory, of the United States, or any applicable
state. Notwithstanding the foregoing, nothing contained in this paragraph 8a
shall (i) impair any rights or potential claims that you may have under the
federal Age Discrimination in Employment Act of 1967 (the "ADEA") subject to
paragraph 8c; (ii) be construed to prohibit Executive from bringing appropriate
proceedings to enforce this Separation Agreement; (iii) effect any rights of
indemnification, or to be held harmless, or any coverage under directors and
officers liability insurance or rights or claims of contribution that you have
or (iv) any rights as a shareholder of the Company.
 
b.           By signing this Separation Agreement, you represent that you have
not and will not in the future commence any action or proceeding arising out of
the matters released hereby, and that you will not seek or be entitled to any
award of legal or equitable relief in any such action or proceeding that may be
commenced on your behalf.  The Company has advised you to consult with an
attorney of your choosing prior to signing this Separation Agreement.  You
represent that you understand and agree that you have the right and have been
given the opportunity to review this Separation Agreement and the ADEA Release,
with an attorney.  You further represent that you understand and agree that the
Company is under no obligation to offer this Separation Agreement, and that you
are under no obligation to consent to the waiver.
 
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c.           In accordance with the ADEA release contained in Exhibit A hereto
(the "ADEA Release"), you shall have twenty-one (21) days from the date of this
Agreement to consider the ADEA Release and once you have signed the ADEA
Release, you shall have seven (7) additional days from the date of execution to
revoke your consent to the ADEA Release.  Any such revocation shall be made in
writing so as to be received by the Company prior to the eighth (8th) day
following your execution of the ADEA Release.  If no such revocation occurs, the
ADEA Release shall become effective on the eighth (8th) day following your
execution of the ADEA Release (the "Effective Date").  In the event that you
fail to sign the ADEA Release within 21 days or revokes your ADEA Release
thereafter as provided above, this Separation Agreement shall remain in full
force and effect but the Company shall have no obligation to provide the
benefits in paragraph 2(b), d(i) and 2e above.
 
9.           Enforcement.  If any provision of this Separation Agreement is held
by a court of competent jurisdiction to be illegal, void or unenforceable, such
provision shall have no effect; however, the remaining provisions shall be
enforced to the maximum extent possible.  Further, if a court should determine
that any portion of this Separation Agreement is overbroad or unreasonable, such
provision shall be given effect to the maximum extent possible by narrowing or
enforcing in part that aspect of the provision found overbroad or
unreasonable.  Additionally, the parties agree that in the event of any breach
of the terms of paragraphs 4, 5 and 6 the other party may seek injunctive and
other equitable relief.  In addition, you agree that your willful and knowing
failure to return Company Property that relates to the maintenance of security
of the Company Entities and Persons or the maintenance of Proprietary
Information shall entitle the Company to such injunctive and other equitable
relief.
 
10.           No Admission.  This Separation Agreement is not intended, and
shall not be construed, as an admission that either you or the Company Entities
and Persons have violated any federal, state or local law (statutory or
decisional), ordinance or regulation, breached any contract or committed any
wrong whatsoever.
 
11.           Successor.  This Separation Agreement is binding upon, and shall
inure to the benefit of, the parties and their respective heirs, executors,
administrators, successors and assigns.
 
12.           Choice of Law.  This Separation Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware without regard to
the principles of conflicts of law.
 
13.           Entire Agreement.  You acknowledge that this Separation Agreement
constitutes the complete understanding between the Company and you, and,
supersedes any and all agreements, understandings, and discussions, whether
written or oral, between you and any of the Company Entities and Persons,
including your Employment Agreement, which shall terminate on the Separation
Date, except for the provisions of Section 2.4, Section 6.5(h), Articles VII and
VIII (as amended herein) and Section 9.1 of the Employment Agreement which shall
survive such termination.  No other promises or agreements shall be binding on
the Company unless in writing and signed by both the Company and you after the
date of this Separation Agreement.
 
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14.           Effective Date.  You may accept this Separation Agreement by
signing it and returning it to Caroline B. Manogue, General Counsel, Endo
Pharmaceuticals Holdings Inc., 100 Endo Boulevard, Chadds Ford, PA 19317.  The
effective date of this Separation Agreement shall be the date it is signed by
both parties, provided that the provisions of paragraph 2b, d(i) and 2e shall
not become effective until the Effective Date, as defined in paragraph 8c.  In
the event you do not accept this Separation Agreement as set forth above, this
Separation Agreement, including but not limited to the obligation of the Company
to provide the payments and other benefits described herein, shall be deemed
automatically null and void.
 

     
Signature:
/s/ Peter A. Lankau
 
Date:
January 28, 2008
 
Peter A. Lankau
                     
ENDO PHARMACEUTICALS HOLDINGS INC.
                     
By:
/s/ Roger Kimmel
 
Date:
January 28, 2008
Title:
Roger Kimmel, Chairman
         

 
 

 

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