Exhibit
10.1


February 23, 2006


 


 


Ms. Deborah L. Tanner


 


 


                Re:          Employment
Letter Agreement (the “Agreement”)


 


Dear Deborah:


 


It is my pleasure to
formally confirm your promotion to the office of Corporate Senior Vice
President of Covance Inc. and President of Covance Central Laboratory Services
(“Covance” or the “Company”) on the terms and conditions of this Agreement.


 


Position


 


As Corporate Senior Vice President of Covance
Inc. and President of Covance Central Laboratory Services, your duties include
the management of the business of Covance Central Laboratory Services.  In addition, you will perform such other
duties and responsibilities that I, as the Chairman & Chief Executive
Officer (“CEO”) may assign to you from time to time.  You will report to me.  Your office will be located in the
headquarters for Covance Central Laboratory Services, which, as you know, is
currently located at 8211 SciCor Drive, Indianapolis, Indiana, or such other
location as determined by the CEO.


 


Salary and Bonus


 


Your salary will be $240,000 per year.


 


You will participate in the Covance Variable
Compensation Plan (the “Bonus Plan”) subject to the terms and conditions
thereof.  Payouts under the Bonus Plan
are contingent upon a number of factors, as specified in the Bonus Plan,
including Covance and your performance. 
If budgeted targets and individual performance criteria are met, you
would be eligible for a bonus equal to 70% of your earned base salary (the “Target
Bonus Award”).  This Agreement does not
constitute an amendment, modification or supplement to the Bonus Plan and to
the extent there are any inconsistencies between this Agreement and the Bonus
Plan, the latter shall govern.  Further,
the Bonus Plan is subject to modification or discontinuation at the discretion
of Covance.  Your base annual incentive
target, however, may be increased from 70%, but not decreased, while you are
employed by Covance.


 


Investment and Benefit Plans


 


You will be eligible to participate in all
the Covance employee benefit plans, including medical, dental, life insurance,
disability, 401(k) savings plan, and Employee Stock Purchase Plan (“ESPP”), in
accordance with the terms and conditions of those plans.  In addition, you will receive paid time off
benefits consistent with the provisions of our Paid Time Off Plan.


 


Auto and Financial
Counseling Allowance


 


You will receive a non-accountable, gross
monthly auto allowance of $1,070 per month paid semi-monthly.  This allowance is in lieu of any direct or
per mile charges you may incur while using your personal car on company
business, except for tolls and parking costs. 
You will be responsible for insurance and all other expenses related to
your car.  In addition, you will also be
eligible to participate in other perquisites and/or benefits programs as are
offered to all other senior executives of Covance as a class.  These include a tax/financial counseling
allowance of  $6,000 per year under the
terms of the Covance plan.  Any expenses
actually incurred under this tax/financial counseling plan will be grossed up
for tax purposes at an incremental income tax rate of 45%.


 

















 


Equity Awards


 


You may be awarded from time to time
additional compensation (such as stock options or performance shares) pursuant
to Covance’s 2002 Employee Equity Participation Plan (as amended, modified or
supplemented from time to time, the “EEPP”) or any additional or replacement
incentive compensation or long-term compensation program established by Covance
for its senior officers.  Any awards
under such programs shall be at such levels or in such amounts as Covance’s
Board of Directors or the Compensation and Organization Committee thereof (the “Compensation
Committee”) deems, in its sole discretion, appropriate for your position and
the performance of your duties.


 


Severance


 


Except as provided below under the paragraph
headed “Change-of-Control”, should you be involuntarily terminated for
reasons other than for Cause, the Company shall pay you the following:


 


(i)  an amount equal to the sum of (a) one year of
base salary (payable on the normal payroll cycle) determined at the time of
termination and (b) one year of the annual incentive bonus (payable on the
normal bonus cycle) in an amount equal for such year to the product of your
base salary and target bonus award in effect at termination  (the sum of (a) and (b) being, collectively,
the “Termination Payments”);


 


(ii)  during the period between the first
anniversary of the date of the involuntary termination of your employment with
the Company for reasons other than Cause and the second anniversary of such
event, your base salary (payable on the normal payroll cycle) with the Company
determined at the time of such involuntary termination in the event that, after
reasonable efforts by you, you have been unable to obtain a suitable
alternative vocation, as determined by Company’s Chief Executive Officer in his
sole discretion;


 


(iii)  your financial counseling and automobile
allowance for the one year period starting on the date of your involuntary
termination from the Company for reasons other than Cause and the first
anniversary of the date of such event on the terms and conditions of the
Section of the Letter Agreement entitled “Auto and Financial Counseling
Allowance”; and


 


(iv)  you shall be entitled to make the COBRA election
for continued medical and dental health insurance benefits for you and your
eligible dependents, subject to the terms and conditions of the applicable
policies and all COBRA requirements, for up to 18 months after the date of your
termination of employment.  In the event
you elect COBRA continuation, and such termination was involuntary for reasons
other than Cause, the Company shall pay you an amount equal to the monthly
premium for such coverage, less usual withholding taxes and other customary withholdings,
from the date of such involuntary termination for reasons other than Cause
until the date that is the later of (x) the first anniversary of such
involuntary termination and (y) the date you have obtained a suitable
alternative vocation, as determined in accordance with Section (ii) above (such
period, not to exceed 18 months after the date of your involuntary termination
from the Company for reasons other than Cause, being the “Health Continuation
Period”).  For the remainder of such 18
month period, if applicable, you shall be responsible for such costs.  If you have not found a suitable alternative
vocation, as determined in accordance with Section (ii) above on or prior to
the date that is 18 months after your involuntary termination from the Company
for reasons other than Cause, then the Company shall continue paying to you the
foregoing premium payments until the earlier of (I) the date you find a
suitable alternative vocation, as determined in accordance with Section (ii)
above and (II) the date that is the second anniversary of your involuntary
termination from the Company for reasons other than Cause.  Such payments will be made to you in equal
installments on the dates during the Health Continuation Period, or such later
period, as applicable, that Covance makes its regular payroll payments.  In the event you were terminated for Cause
and the COBRA election is still available to you under applicable law, and you
so elect the COBRA continuation, you shall be responsible for all health
benefit premium costs.  Life insurance
coverage will continue, at the Company’s expense, for the period during which
the Company pays the premiums for health coverage provided above.


 


Notwithstanding anything in this Severance
section to the contrary, you agree that if you obtain or are provided with
medical, dental and life insurance from a new employment position which
provides comparable coverage and benefits to that provided by the Company under
the respective Company benefit plans and at an equivalent or


 

















 


lesser expense (both deductible and direct)
to you, then you shall promptly notify the Company which of such insurance
benefits is then being provided to you and the Company shall cease providing
such coverage or discontinue paying the premiums for such insurance, as
applicable.  You agree to promptly update
the Vice President — Global Compensation, Benefits and HR Technology of the
Company of any change in your employment or benefits coverage status during any
period you are receiving benefits hereunder.


 


Please refer to that certain Confidentiality
and Non-Competition Agreement between you and the Company (the “Non-Competition
Agreement”).  You agree that any of the
severance payments under Section (i) or (ii) above shall constitute the payment
of your base salary under Section 4(a)(ii) of the Non-Competition Agreement.


 


“Cause” shall mean (i) your
convictions of a felony or a misdemeanor if such misdemeanor involves moral
turpitude; (ii) your committing any act of gross negligence or intentional
misconduct in the performance or non-performance of your duties as an employee
of Covance or its affiliates, including, any actions which constitute sexual
harassment under applicable laws, rules or regulations; (iii) your failure to
perform your duties assigned for a period of thirty (30) or more days unless
such failure is caused by an Extended Disability; or (iv) misappropriation of
assets, personal dishonesty or intentional misrepresentation of facts which may
cause Covance or its affiliates financial or reputational harm.


 


Should your employment be terminated by
Covance because of an Extended Disability (as defined below), and not for any
other reason that constitutes Cause, within 30 days after written notice of
termination is given to you (generally after 180 consecutive days where you
have not returned to your duties on a full-time basis), Covance shall pay to
you a lump sum amount equal to the sum of (a) two years base salary determined
at the time of termination, and (b) two years of the annual incentive bonus
reflective of your target bonus award at the time of termination (the sum of
(a) and (b) being, collectively, the “Extended Disability Payments”).


 


Extended Disability shall (i) mean
you are unable, as a result of a medically determinable physical or mental
impairment, to perform the duties and services of your position, or (ii) have
the meaning specified in any disability insurance policy maintained by Covance,
whichever is more favorable to you.


 


Except as may be otherwise provided in
applicable Covance compensation and benefit plans, Covance shall not be liable
for any salary or benefit payments to you beyond the date of your voluntary
termination of employment with Covance. 
In the event of a termination of employment for Cause or Extended
Disability, you shall not be entitled to any compensation or other benefits not
already earned and owing to you on account of your services on the date of such
termination of employment except as provided above with respect to a
termination for Extended Disability.  The
provision of any benefits pursuant to this Agreement shall be in lieu of, and
not in addition to, any payment or benefits you otherwise would have been
entitled to pursuant to any severance pay plan of Company, including, without
limitation, that certain Amended and Restated Severance Pay Plan.


 


Change-of-Control


 


In the event of an Event of Termination (as
defined below), you will be entitled to a lump sum payment equal to the sum of
(1) the product of (a) 3 and (b) your base annual salary in effect at the time
of the Event of Termination and (2) the product of (a) 3 and (b) number that is
your base annual salary times your target bonus percentage in effect at the
time of the Event of Termination.  Such
payment will be made within 60 days of the Event of Termination.  In addition to, and as a result of, the
foregoing (i) all of your stock options, restricted stock, deferred
compensation and similar benefits which have not become vested on the date of
an Event of Termination shall become vested upon such event and (ii) you shall
be entitled to receive any payments calculated pursuant to the paragraph headed
“Certain Additional Payments by Covance”.


 


For the purposes of this Agreement, an Event
of Termination is defined to be a termination of your employment by Covance
(for reasons other than Cause) or a Constructive Termination (as defined below)
of your employment, in each case within 24 months following a Change-of-Control
(as defined below), or your voluntary termination of your employment for any
reason or no reason during the one-month period commencing twelve months
following a Change-of-Control and ending thirteen months after such
Change-of-Control (a “Voluntary Termination”); provided, however,
that a Voluntary Termination shall not be an Event of Termination if it arises
from a Change-of-Control pursuant to clause (iv) under the definition of
Change-of-Control unless the tender offer or exchange


 

















 


offer is a tender or exchange offer for
securities representing 20% or more of the combined voting power of Covance’s
then outstanding securities.


 


For purposes of this Agreement, a
Change-of-Control is defined to occur when:


 


                (i)  any person (including as such term is used in
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the beneficial
owner, directly or indirectly, of Covance’s securities representing 20% or more
of the combined voting power of Covance’s then outstanding securities; or


 


                (ii)  as a result of a proxy contest or contests or
other forms of contested shareholder votes (in each case either individually or
in the aggregate), a majority of the individuals elected to serve on Covance’s
Board of Directors are different than the individuals who served on Covance’s
Board of Directors at any time within the two years prior to such proxy contest
or contests or other forms of contested shareholder votes (in each case either
individually or in the aggregate); or


 


                (iii)  Covance shareholders approve a merger, or
consolidation (where in each case Covance is not the survivor thereof), or sale
or disposition of all or substantially all of Covance’s assets or a plan or
partial or complete liquidation; or


 


                (iv)  an offeror (other than Covance) purchases
shares of Covance common stock pursuant to a tender or exchange offer for such
shares.


 


For purposes of this Agreement, a
Constructive Termination is defined to be:


 


(i)  a material breach by Covance of this
Agreement, including, without limitation, a reduction in your then current
salary or the percentage of base salary eligible for incentive compensation;


 


(ii)  a diminution of your responsibilities,
status, title or duties hereunder;


 


(iii)  a relocation of your work place which
increases the distance between your principal residence and your work place by
more than 25 miles;


 


(iv)  a failure by Covance to provide you with
benefits which are as favorable to you in all material respects as those
provided immediately prior to the Change-of-Control; or


 


(v)  the failure of any acquiror or successor in
interest to the business of Covance to agree in writing to be bound by the
terms of this Agreement within four months of any Change-of-Control.


 


In the event you are involved in any dispute
about your rights under this Agreement arising on or after a Change-of-Control,
Covance shall pay all legal costs and fees incurred by you in connection with
such dispute promptly upon receipt of any invoice relating thereto.


 


With respect to an Event of Termination, the
benefits set forth under the paragraph headed Auto and Financial Counseling
Allowance and medical, dental, disability and life insurance will be
continued, to the extent they are not otherwise prohibited under the respective
plans, until you find other employment but not longer than three years from the
date of the Event of Termination.


 


Certain Additional Payments
by Covance


 


                (a)           Anything in this Agreement to the
contrary notwithstanding, in the event it shall be determined that any payment
or distribution by, to or for the benefit of you, whether made under this
Agreement or otherwise (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Excise
Tax”), then you shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by you of all taxes (including
any Excise Tax) imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.


 

















 


                (b)           All determinations required to be
made under these provisions, including whether a Gross-Up Payment is required
and the amount of such Gross-Up Payment, shall be made by the accounting firm
utilized by Covance for the preparation of its annual external financial
statements (the “Accounting Firm”) which shall provide detailed supporting
calculations both to Covance and you within 30 days of the Event of
Termination, if applicable, or such earlier time as is requested by
Covance.  The Gross-Up Payment, if any,
as determined pursuant to this Paragraph (b), shall be paid to you within 10
days of the receipt of the Accounting Firm’s determination.  Any determination by the Accounting Firm
shall be binding upon Covance and you. 
If subsequent final determinations of the Excise Tax made by the
Internal Revenue Service give rise to additional Excise Tax, then additional
Gross-Up Payments shall be made by Covance to you within 10 days after the
notice is received by Covance of such final determination.


 


                (c)           You shall notify Covance in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by Covance of a Gross-Up Payment. 
Such notification shall be given as soon as practicable but no later
than 10 business days after you know of such claim.  You shall not pay such claim prior to the expiration
of the thirty-day period following the date on which you give such notice to
Covance (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due).  If
Covance notifies you in writing prior to the expiration of such period that it
desires to contest such claim, you shall:


 


                                                                (i)            give Covance any information reasonably requested by
Covance relating to such claim,


 


                                                                (ii)           take such action in connection with contesting such claims
as Covance shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney selected by Covance,


 


                                                                (iii)          cooperate with Covance in good faith in order effectively
to contest such claim, and


 


                                                                (iv)          permit Covance to participate in any proceedings relating
to such claim; provided, however, that Covance shall bear all costs and
expenses incurred in connection with such contest and shall indemnify and hold
you harmless, on an after-tax basis, for any Excise Tax or income tax imposed
as a result of such contest or representation and payment of costs and
expenses.  Covance shall control all
proceedings taken in connection with such contest.  Covance may, at its sole option, either
direct you to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and you agree to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Covance shall determine; provided,
however, that if Covance directs you to pay such claim and sue for a
refund, Covance shall advance the amount of such payment to you on an
interest-free basis and shall indemnify and hold you harmless, on an after-tax
basis, from any Excise Tax or income tax imposed with respect to such advance.


 


                (d)           If, after the receipt by you of an
amount advanced by Covance pursuant to Paragraph (c), you become entitled to
receive any refund with respect to such claim, you shall promptly pay to
Covance the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). 
If, after the receipt by you of an amount advanced by Covance pursuant
to Paragraph (c), a final determination is made that you shall not be entitled
to any refund with respect to such claim, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance shall
offset the amount of Gross-Up Payment required to be paid.


 


Injunctive Relief


 


You agree that the remedies available to Covance at law for any breach
of any of your obligations under this Agreement may be inadequate, and you
accordingly agree and consent that temporary or permanent injunctive relief,
and/or an order of specific performance, may be granted in any proceeding which
may be brought to enforce any provision hereof, without the necessity of proof
of actual damage, in addition to any other remedies available to Covance at
law.


 


 

















Outplacement


 


If there has been an Event of Termination,
Covance shall provide for you, at Covance’s cost, executive outplacement
support for one year following such termination.


 


Release


 


If there has been an Event of Termination or
if there has been no Change-of-Control but you have been terminated without
Cause, the obligation of Covance to make to you any or all of the payments
specified under this Agreement (including, without limitation, the Termination
Payments, the salary continuation payments described in Section (ii) of the
section entitled Severance of this Letter Agreement or the payments
specified under the paragraph headed “Change of Control”, as applicable)
shall be subject to your execution and delivery to Covance of a release in form
and substance reasonably satisfactory to Covance of all claims, demands, suits
or actions, whether in law or at equity, you have or may have relating to or
giving rise from such Event of Termination or non-Cause termination.


 


Plans and Conflicts


 


As in the case with the Bonus Plan, the
Agreement does not constitute an amendment, modification or supplement to any
other plan or policy (benefit, compensation or otherwise, including without
limitation the EEPP, SERP, 401(k) Savings Plan, and ESPP) of Covance, whether
or not described in the Agreement, and to the extent there is any inconsistency
between the Agreement and any other plan (benefit, compensation or otherwise,
including without limitation the EEPP, SERP, 401(k) Savings Plan, and ESPP), of
Covance, whether or not described herein, such plans or policies shall
govern.  Further, nothing in this
Agreement shall constitute a limitation on Covance’s right to modify or
discontinue any such plans or policies.


 


The provisions of employment relating to
health benefits, vacation and reimbursement for business expenses, professional
dues, etc. will be administered in accordance with company policies, as they
may be amended, modified or supplemented from time to time.


 


Governing Law


 


This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey.


 


Conditions to Effectiveness


 


This Agreement will become effective as of
the date first written above upon which all of the following conditions have
been satisfied:


 


a)             The Board of Directors has approved this Agreement; and


 


b)            The Agreement has been executed and
delivered by each of you and Covance.


 


Representations and
Warranties


 


You hereby represent and warrant to Covance
the following:


 


a)             You are not currently party to any contract of
employment that might impede or impair your ability to execute this Agreement
or perform the services contemplated hereof;


 


b)            You are not subject to any non-competition agreement,
arrangement or understanding or any other restrictive covenants that might
restrict your employment by Covance pursuant to this Agreement or otherwise.


 


c)             You shall hold the terms and conditions of your
employment with Covance, including this Agreement, in strict confidence and
will not divulge the terms thereof to anyone else except employees or agents 


 

















 


of Covance who have a need to know or your
spouse, accountant, investment advisor, lawyer or others who have a need to
know, provided, they are under similar obligations of confidentiality.


 


Waivers


 


The failure of either party at any time to
require performance by the other party of any provision hereof shall not affect
in any way the full right to require such performance at any time thereafter,
nor shall a waiver by either party of a breach of any provision hereof be taken
or held to be a waiver of future performance under the provision itself.


 


Scope of Restrictions
Reasonable


 


You hereby expressly agree that all of the
covenants in this Agreement are reasonable and necessary in order to protect
Covance and its business.  If any
provision or any part of any provision of this Agreement shall be invalid or
unenforceable under applicable law, such part shall be ineffective only to the
extent of such invalidity or unenforceability and shall not affect in any way
the validity or enforceability of the remaining provisions of this Agreement,
or the remaining parts of such provision.


 


Assignment; Amendments


 


This Agreement shall be binding on and inure
to the benefit of the parties hereto and their heirs, executors, legal
representatives, successors and assigns. 
Except in the event of a transfer to a successor corporation or other
entity or affiliate of Covance, neither party shall have the right to assign
its rights or delegate its obligations, or all or any portion of its rights or
interests under this Agreement without the prior written consent of the other
party hereto.  This Agreement may be
amended only by a written instrument signed by both parties hereto making
specific reference to this Agreement and expressing the plan or intention to
modify it.


 


Notification


 


Any notice, request, demand, or other
communication required or permitted by this Agreement shall be deemed to be
properly given if delivered by hand or when mailed certified, registered or
first class mail or overnight courier with postage or shipping charge prepaid,
addressed to Covance at 210 Carnegie Center, Princeton, New Jersey  08540, Attention: CEO and to you at your
address specified above, and all such notices shall be deemed effective at the
time of delivery or at the time delivery is refused by the addressee upon
participation.  The addresses for the
purpose of this Paragraph may be changed only by giving written notice of such
change in the manner provided herein for giving notices.


 


Captions


 


The captions of the Paragraphs herein are
inserted as a matter of convenience only and in no way define, limit or
describe the scope of this Agreement or any provisions hereof.


 


Entire Agreement


 


This
Agreement sets forth the entire agreement and understanding between the parties
hereto as to the subject matter hereof, and as such supersedes in its entirety
any existing agreement or offer letters, whether oral or written, between you
and Covance, except for any confidentiality and/or non-competition agreements
between you and Covance which shall continue in full force and effect in
addition to any of the provisions contained in this Agreement.


Employee at Will


 


This Agreement is not a contract of
employment.  Your employment by Covance
is for no fixed term, and either you or Covance may terminate the employment
relationship at any time for no reason or any reason not prohibited by
applicable laws.


 

















 


Please indicate your agreement with the terms
and conditions of this Agreement by signing two copies of this Agreement and
returning them to my attention.


 


Very truly yours,


 


 


 


Joseph L. Herring


Chairman and Chief Executive Officer


 


 


Accepted as of the date first above
specified:


 


 


	
  By:

  	
   

  
	
   

  	
  Deborah L. Tanner