SEPARATION AGREEMENT AND RELEASE

Exhibit 10.1

SEPARATION AGREEMENT AND RELEASE

This Separation Agreement and Release (“Separation Agreement”) is entered into by and between Charles A. Rowland, Jr. (“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 September 2, 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 any of the Company’s subsidiaries shall be effective as of the Separation Date. 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 4(b) below. The benefits below shall be in full satisfaction of the Company’s obligations under the terms of the Employment Agreement and all applicable cash or equity incentive compensation plans and agreements except as otherwise preserved by specific reference herein.

a. The Company shall pay you an aggregate of $1,404,000 (the “Separation Amount”), which represents two times the sum of (i) your current annual base salary ($468,000) and (ii) your target incentive compensation for the fiscal year in which the Separation Date occurs (50% 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.

b. 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.

c. 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. 2004 Stock Incentive Plan or the Endo Pharmaceuticals Holdings Inc. 2007 Stock Incentive Plan, as applicable (the “Stock Incentive Plans”), as follows:

The parties also acknowledge and agree that you are party to a Restricted Stock Unit Award Agreement (the “RSU Agreement”) under which you have been granted 6,699 restricted stock units representing 6,699 shares of common stock of the Company (the “RSUs”) pursuant to the terms of the Endo Pharmaceuticals Holdings Inc. 2007 Stock Incentive Plan. These RSUs vest 50% on February 21, 2010 and February 21, 2012.

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d. The Company shall pay you, within 30 days following the Effective Date, an additional $20,000 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 $10,000.

e. The Company shall provide you with continued use of your current Company automobile until the end of its current lease or the one-year anniversary of the Separation Date, whichever is later. In accordance with Section 4.2 of the Employment Agreement, the Company will reimburse you for all operating expenses relating thereto upon the Executive’s submission of appropriate documentation as set forth in the Employment Agreement. The Company will determine the actual value, if any, of your non-business use of such automobile and will furnish you with a W-2 Wage and Tax Statement, grossed up for taxes, to be included in your income tax returns, in accordance with prevailing Internal Revenue Service regulations. All reimbursements and gross-ups under this paragraph shall be made as soon as practicable, and in no event later than the calendar year following the year in which the expenses are incurred or taxes are remitted.

f. The Company agrees that it will not seek reimbursement of any amounts paid to you relating to relocation pursuant to the offer letter dated October 19, 2006. Any sums received as reimbursement for such relocation expenses in calendar 2008 shall be grossed up for taxes, to be included in your income tax returns, in accordance with prevailing Internal Revenue Service regulations with payments relating to any gross-up under this paragraph made on or before December 31, 2008.

g. Notwithstanding the foregoing, in the event that the Effective Date does not occur by October 3, 2008, the Company’s obligation to make the payments and to provide the benefits set forth in paragraphs 2(c)(ii), 2(d), 2(e) and 2(f) above shall cease. Additionally, the Company’s obligation to make the payments and to provide the benefits set forth in paragraphs 2(c)(ii), 2(d), 2(e) and 2(f) 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.

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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 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 ea