Exhibit 10.16
                                   COVANCE WAY


                                  COVANCE INC.
                           VARIABLE COMPENSATION PLAN

1. Purpose. The purpose of the Covance Inc. Variable Compensation Plan (as
amended, modified or supplemented, from time to time, the "Plan") is to reward
participating employees of Covance Inc. ("Covance") and its subsidiaries
(collectively, the "Company") for the attainment of superior performance. The
Plan does not constitute an amendment, supplement or modification of any
individual employment agreement between the Company and an employee or to that
certain Asset Purchase Agreement dated as of March 15, 1996 among Covance and
the parties specified therein with respect to the earning or payment of variable
or bonus compensation.

2. Eligibility. Variable compensation awards under the Plan may be made to
individuals who are full-time employees of the Company (including executives or
managers of the Company) provided, that (1) the employee is employed with the
Company on or before October 1 of the performance year in question, except as
specified below, and (2) the employee is employed by the Company both as of
December 31 of the performance year in question and on the date that the
variable compensation award for the performance year in question is actually
paid, except as specified below; provided, further, that (a) with respect to
clause (1) above, in the event an individual is employed by the Company (i) on
or after October 1 for the performance year in question but otherwise satisfies
the eligibility or performance requirements of the Plan, then the Committee may
approve a variable compensation award for such individual based on the chief
executive officer's ("CEO") recommendation or (ii) after January 1 of the
performance year in question but before October 1 of such year and otherwise
satisfies the eligibility or performance requirements of the Plan, then such
employee's variable compensation award, if any, shall be prorated based on the
actual service provided by the employee for

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the performance year in question based either on time worked or base pay earned
and (b) with respect to clause (2) above, in the event any employee who leaves
the Company during the performance year in question or prior to the date the
variable compensation award for such performance year is paid, in each case as a
result of death, disability or retirement with the consent of Covance, any such
award or payment shall be prorated based on actual service provided by the
employee for the performance year in question based on time worked or base pay
earned in the performance year in question. In all cases any variable
compensation awards under the Plan will be based on actual service provided by
the employee for the performance year in question based on time worked or base
pay earned in the performance year in question. The term "subsidiary" means any
corporation in an unbroken chain descending from the parent company, where each
corporation, other than the last in the chain, owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in the chain.

3. Administration/Disputes. The Compensation Committee of the Covance Board of
Directors (the "Committee"), or a subcommittee of such committee, consisting of
at least two members who qualify as outside directors under applicable Internal
Revenue Code and Securities and Exchange Commission (the "SEC") rules, codes and
regulations, shall manage and administer the Plan. No member of the Committee
shall be eligible for awards under the Plan. The Committee may adopt policies,
rules and regulations that it deems necessary for governing, managing or
administering the Plan. It may take action either by a majority vote of its
members in attendance provided there is a quorum, or by an instrument in writing
signed by all members without a meeting. Members of the Committee shall not be
liable for any act or omission in their capacities as such members, except for
bad faith, gross negligence or intentional misconduct or inaction. Any dispute
or disagreement which shall arise under, or as a result of, or pursuant to, this
Plan shall be finally determined by the Committee in its absolute and
uncontrolled discretion, and any such determination or any other determination
by the Committee under or pursuant to this

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Plan and any interpretation by the Committee of the terms of this Plan, shall be
final, binding and conclusive on all persons affected thereby.

4. Performance Year. Each consecutive twelve month period from January 1 through
December 31 shall be treated as a separate performance year for the purpose of
the Plan.

5. Covance Bonus Pool. The Committee shall approve at the beginning of each
performance year in question, or as soon as practicable thereafter, but in no
event later than the date that is 90 days after the beginning of such
performance year, the minimum and maximum aggregate amount of money available
for variable compensation under the Plan and the target aggregate variable
compensation awards in each case based on a financial target such as pre-tax and
pre-bonus income of the Company (the "Bonus Pool"). The Bonus Pool shall be
allocated among Covance's corporate group (such group, other than the CEO and
executive management (including the Corporate Senior Vice Presidents), being,
"Covance Corporate"), various divisions, Business Units and Operating Groups and
the CEO and executive management (including the Corporate Senior Vice
Presidents) as specified in Paragraph 8.

6. Scorecards. (a) Executive/Business Units/Operating Groups/Scorecards. Within
the time limit specified in Paragraph 5, the CEO shall approve a "scorecard" of
objectives to be achieved during the performance year for each Business Unit or
Operating Group of the Company (other than the Non-Scorecard Business Units, as
defined in Paragraph 7). Such objectives may be based on a variety of business
criteria, including financial performance, such as operating margin, pre-tax
income, or revenue, and other criteria, all or some of which may be applicable
to all of the Company or only to the Business Unit or Operating Group.

     (b) Individuals. (i) Objectives. Within the time period specified in
Paragraph 5, the Committee shall approve the objectives for the performance year
in question of the

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CEO and the CEO shall approve the objectives of his direct reports, including
the Corporate Senior Vice Presidents. In the case of the CEO and his executive
management team, including the Corporate Senior Vice Presidents, such objectives
shall be based on a variety of criteria, including financial performance, such
as operating margin, pre-tax, pre-bonus operating margin, revenue or earnings
per share and other criteria which are of the category type (as opposed to the
actual objectives) specified in the scorecards of the Business Units and
Operating Groups.

     The Committee shall also review and approve by category employees who shall
be subject to individual performance objectives for the performance year in
question. Such objectives shall be in form and substance acceptable to such
employee's supervisor or senior management, as applicable, and completed within
the time period specified in Paragraph 5. The Committee shall also designate
employees by category who shall not be required to provide such objectives.

        (ii) Variable Compensation Targets. The Committee will establish a
variable compensation target for each level of participating employee by
category of position reflected as a percentage of an employee's base pay earned
during the performance year in question (the "Employee Bonus Percentage", and
the product of an employee's base pay earned during the performance year and the
applicable Employee Bonus Percentage is, the "Employee Bonus Target Amount").

        (iii) Performance Ratings. The Committee shall establish performance
assessment categories for both employees with and without objectives and the
impact, in each case, of such performance assessment on such individuals'
variable compensation award, if any, under the Plan.

7. Non-Scorecard Business Units. Covance Corporate and the Business Units
approved by the CEO (individually, a "Non-Scorecard Business Unit" and,
collectively,

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the "Non-Scorecard Business Units") shall not be required to prepare
"scorecards". Instead, the CEO shall approve within the time period specified in
Paragraph 5 financial targets for such Non-Scorecard Business Units for the
performance year in question and the amount of variable compensation each such
Non-Scorecard Business Units would be eligible for in the aggregate if its
applicable financial target is achieved for the performance year in question.

8. Computations. (a) Measurement. The Committee shall certify in writing before
the payment of any variable compensation under the Plan the amount of the actual
Bonus Pool for the applicable performance year and whether the objectives of
Covance's CEO has been satisfied for the performance year in question. Further,
Covance's CEO shall assess the performance of the Business Units and Operating
Groups and his executive management, including the Corporate Senior Vice
Presidents, compared to their applicable scorecards or objectives and, as more
fully specified in Paragraph 8(c), whether the performance targets for the
Non-Scorecard Business Units have been satisfied, in each case, for the
performance year in question and shall, at the Committee's request, review such
assessments with the Committee. Approved minutes of the Committee shall satisfy
the foregoing requirement. In calculating the amount of the actual Bonus Pool as
of the end of the performance year in question and assessing whether the
scorecards and objectives and the financial targets for the Non-Scorecard
Business Units, in each case, have been satisfied, in whole or in part, as
applicable, or exceeded on a basis consistent with circumstances existing when
the budgeted Bonus Pool, such scorecards and objectives and the financial
targets for the Non-Scorecard Business Units, in each case, were established,
the Committee or the CEO, as applicable, may include or exclude, as applicable,
the effect on the Bonus Pool, the scorecards and objectives and the financial
targets for the Non-Scorecard Business Units arising from any acquisition of the
stock or assets of any other person or entity, the divestiture of all or any of
the Company's businesses, restructurings, strategic expenditures by Covance
identified to the Covance Board of Directors as such, force majeure events,
material

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litigation, any adjustment to the Bonus Pool financial target, where such target
is based on pre-bonus and pre-tax income, necessary to achieve the budgeted
earnings per share target for the performance year in question based on the
actual results for the performance year in question for items below the pre-tax
line on the income statement such as taxes, equity earnings and the weighted
average shares outstanding, changes in tax laws or accounting practices, or any
other unexpected or unforeseen extraordinary event or occurrence during the
performance year; provided, however, that with respect to Company employees who
meet the definition of "covered employee" under Section 162(m) of the Internal
Revenue Code, as amended from time to time and the regulations thereunder the
Committee shall not increase the amount of compensation payable to such employee
that would otherwise be paid based upon attainment of the scorecards in
question.

     (b) Bonus Pool Allocations - CEO Discretionary Awards. The CEO shall have
the discretion and authority to allocate up to $500,000 of the Bonus Pool (the
"Discretionary Bonus") to any individual who is not a Corporate Vice President
or higher or to any of the Business Units (including the Non-Scorecard Business
Units) or Operating Groups based on his sole and absolute judgment that such
individual or entity has made a significant contribution to the Company's
success or for some other compelling business reason. Such Discretionary Bonus
shall not be paid until (1) the CEO has advised the Committee of his rationale
for such award and (2) the other amounts payable under the Plan have been paid.

     (c) Bonus Pool Allocations - Non-Scorecard Units. The CEO shall review the
Non-Scorecard Business Units' financial results after the completion of the
performance year in question. In the event that such Non-Scorecard Business
Units either do better or worse than the financial target specified for such
Non-Scorecard Business Unit, then the CEO shall determine and approve the amount
from the Bonus Pool, if any, that should be allocated to each such Non-Scorecard
Unit, if any.

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     (d) Bonus Pool Allocations - Covance Corporate. Covance Corporate employees
shall be awarded a variable compensation amount under the Plan equal to the
product of (1) a fraction, (x) the numerator of which is the Bonus Pool and (y)
the denominator of which is the 1x Bonus Pool (as hereinafter defined), (2) such
Covance Corporate employee's Employee Bonus Target Amount and (3) such
employee's bonus payout percentage, determined in accordance with such
employee's performance rating. "1x Bonus Pool" means the aggregate amount of
variable compensation that would accrue under the Plan if the Company earned
100% of the financial target approved by the Committee for the applicable
performance year; provided that the foregoing amount shall be adjusted for the
actual number of employees who are actually employed by the Company both as of
December 31 of the performance year in question and the date that variable
compensation under the Plan is actually paid for the performance year in
question, their length of service during the performance year in question, and
the actual time worked or base pay earned during the performance year in
question.

     (e) Bonus Pool Allocations - CEO and Executive Management. Part I of
Appendix 1 sets forth the components of the variable compensation awards under
the Plan for any given performance year for the CEO and executive management
(including the Corporate Senior Vice Presidents). Part II of Appendix 1 sets
forth the method for computing such awards based on actual Company financial
performance.

     (f) Bonus Pool Allocations - Business Units/Operating Groups. The amount of
the Bonus Pool that shall be available for allocation to the Business Units and
Operating Groups for a given performance year shall be the difference between
(1) the actual Bonus Pool for such performance year and (2) the sum of the
variable compensation awards determined pursuant to Paragraphs 7(b) - (e) above
(the foregoing sum being, the "Bonus Deductions"). Appendix 2 sets forth the
methodology for determining a Business Unit's or Operating Group's actual
allocable share of the Bonus Pool (after giving effect to the Bonus Deductions)
for the performance year in question (such variable compensation

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amount being for each such Business Unit or Operating Group, a "Business Unit
Actual Bonus Pool").

     (g) Bonus Pool Allocations - Individuals. Except in the case of the CEO and
the members of executive management (including Corporate Senior Vice Presidents)
and all employees of Covance Corporate, actual variable compensation awards
under the Plan to all employees of the Company are determined as set forth in
Appendix 3; provided, however, that with respect to employees who are not
Corporate Vice Presidents of the Company or higher, the CEO shall have the
authority to adjust, after consultation with appropriate members of management,
any individual's variable compensation award under the Plan; provided, further,
however, that in no event shall the aggregate amount of the variable
compensation payments to a Business Unit or Operating Group for a given
performance year exceed such Business Unit's or Operating Group's allocable
share of the Bonus Pool, nor shall the aggregate of the variable compensation
awards to all employees under the Plan for a given performance year exceed the
actual Bonus Pool earned for such performance year.

     (h) Prorations. In furtherance of the second provisio of Paragraph 8(g),
the computation of any individual variable compensation award to any employee
under this Plan (including the CEO and executive management) shall be prorated
for the aggregate effect of individual performance assessments that, without
giving effect to such proration, would result in variable compensation awards
that would otherwise exceed the amount of the actual Bonus Pool for the
performance year in question.

9. Maximum Variable Compensation Award Payout. In no event shall any individual
receive more than 200 percent of such individual's variable compensation target.

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10. Payment of Awards. Variable compensation awards earned under the terms of
the Plan in excess of specified base levels may at the discretion of the
Committee, after consultation with Covance's management, be paid in cash, or in
stock options through the Employee Equity Participation Plan, or both. Payment
will be made as soon as practicable after the performance year in question, but
no later than each March 15 following the close of the applicable performance
year. Individuals may elect to defer payment of the variable compensation awards
in the event the Company has established a deferred compensation plan for
employees on the terms and conditions of such deferred compensation plan.

11. GOVERNING LAW; BINDING EFFECT. THIS PLAN SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY (WITHOUT REGARD TO THE
CONFLICT OF LAW PROVISIONS THEREOF) AND ALL QUESTIONS CONCERNING THE VALIDITY
AND CONSTRUCTION THEREOF SHALL BE GOVERNED IN ACCORDANCE WITH THE LAWS OF SAID
STATE; PROVIDED, HOWEVER, THAT ALL MATTERS OF CORPORATE GOVERNANCE AND OTHER
CORPORATE MATTERS CONCERNING DELAWARE CORPORATIONS SHALL BE GOVERNED BY THE
DELAWARE GENERAL CORPORATION LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN,
THIS PLAN SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF THE PARTIES HERETO,
THEIR LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS.

12. Termination of Employment. Participation in the Plan does not create a
contract of employment, nor grant any employee of the Company the right to be
retained in the service of, or otherwise employed by, the Company. Individuals
will not receive a variable compensation award under this Plan for the
performance year in which their employment terminates for any reason or if they
are terminated for any reason prior to the date the variable compensation is
actually paid for the performance year in question, except as otherwise provided
in Paragraph 2 hereof. Without limitating the foregoing or

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Paragraph 2 hereof, any individual whose employment is terminated for
wrongdoing, including, but not limited to, a violation of the Company's Business
Integrity Program, including the Code of Conduct, will forfeit all rights to
payment under this Plan.

13. Effective Date. The Plan will take effect as of January 1, 1999 and
supersedes in their entirety the Covance Way Covance Inc. Variable Compensation
Plan, as amended, effective January 1, 1998, the Covance Inc. Variable
Compensation Plan, as amended, and effective January 1, 1997, the Covance Inc.
General Employee Variable Compensation Plan, as amended, and effective January
1, 1997 and the Covance Biotechnology Services Inc. Variable Compensation Plan,
as amended, and effective January 1, 1997.

14. Amendment, Suspension, or Termination. The Board or Committee may, at any
time, suspend, terminate or amend the Plan, in such respects as the Board or
Committee deems to be in the best interest of the Company. No amendment will
adversely affect any right of any grantee, or his successors in interest, to
keep any variable compensation award actually made hereunder before the
effective date of the amendment. Plan deferrals, if any, in effect at the Plan's
termination remain in effect according to their original terms.

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                                   APPENDIX 1

                    COMPONENTS, ADJUSTMENTS AND COMPUTATIONS
                             OF EXECUTIVE MANAGEMENT
                          VARIABLE COMPENSATION AWARDS

Part I.  Components

        A.     CEO and STAFF EXECUTIVE MANAGEMENT (e.g., CORPORATE SENIOR 
               VICE PRESIDENTS)

        o      50% of variable compensation award is based on satisfaction of
               objectives specified in individual objectives (which objectives
               shall include an earnings per share target).

        o      50% of variable compensation awards is based on satisfaction of
               targeted Covance pre-tax and pre-bonus income as specified for
               the applicable performance year.

        B.     OPERATIONS EXECUTIVE MANAGEMENT (e.g., CORPORATE SENIOR
               VICE PRESIDENTS who are GROUP PRESIDENTS)

        o      50% of the variable compensation award based on satisfaction of
               objectives specified in individual objectives.

        o      50% of the variable compensation award is based on satisfaction
               of targeted Covance pre-tax and pre-bonus income as specified for
               the applicable performance year.


Part II.  Methodology

The CEO or any member of Executive Management (e.g., Corporate Senior Vice
Presidents) shall be awarded a variable compensation amount under the Plan equal
to the sum of (1) an amount equal to the product of (w).5, (x) such executive's
Employee Bonus Target Amount, (y) such executive's bonus payout percentage,
determined in accordance with such executive's performance rating and (z) a
fraction (i) the number of which is the actual Bonus Pool and (ii) the
denominator of which is the 1x Bonus Pool, as adjusted, and (2) an amount equal
to the product of (x) .5, (y) such executive's Employee Bonus Target Amount and
(z) a fraction (i) the numerator of which is the actual Bonus Pool and (ii) the
denominator of which is the 1x Bonus Pool, as adjusted.

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                                   APPENDIX 2

                              BONUS POOL ALLOCATION
                                   METHODOLOGY



        Methodology: The CEO shall review and determine a Business Unit's or
Operating Group's performance against its scorecard after the completion of the
performance year in question. The scorecard point total shall be determined by
assessing the Business Unit's or Operating Group's scorecard performance in two
areas: "earnings" and "other". With respect to "earnings", the Business Unit or
Operating Group will earn 90 points if it meets the earnings target specified
in its scorecard and 10 points if it meets, in their totality, the "other"
targets specified in its scorecard. Achieving total targeted performance for the
Business Unit or Operating Group results in a total of 100 points. A Business
Unit's or Operating Group's actual performance against either the "earnings" or
"other" targets will result in a scorecard point adjustment as specified below:


                             SCORECARD POINT RANGE:


<TABLE>
<CAPTION>
                             Minimum                 Target             Maximum
                            Performance          Performance           Performance
                            -----------          -----------           -----------
        <S>                    <C>                   <C>                   <C>        <C>
        Category

        Earnings(1)            50                     90                    110       Points

        Other(2)                0                     10                    20

        TOTAL                  50                    100                   130
</TABLE>

--------
(1) A Business Unit or Operating Group scores the maximum of 110 points for the
"earnings" category if it achieves 120% of its earning's target, as specified in
its scorecard (such entity gets 1 additional point for each 1% over its earnings
target), and a minimum of 50 points by achieving 80% or less of its earnings
target (i.e., such entity loses 2 points for each 1% deficiency to its earnings
target).

(2) A Business Unit or Operating Group can earn as low as zero points for
failure to achieve its "other" targets in their totality as specified in its
scorecard and up to 20 points for exceeding such targets in their totality. 

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<PAGE>


                                   APPENDIX 3

                     INDIVIDUAL EMPLOYEE PAYOUT METHODOLOGY


Methodology

Any employee of the Company, except as specified in Paragraph 8(g) of the Plan,
will be paid a variable compensation amount under the Plan equal to the product
(1) a fraction, (a) the numerator of which is the Employee Theoretical Bonus
Amount (as hereinafter defined) and (b) the denominator of which is the sum of
the Business Unit's or Operating Group's Employee Theoretical Bonus Amounts and
(2) the Business Unit Actual Bonus Pool.

"Employee Theoretical Bonus Amount" means the product of the Employee Bonus
Target Amount and the individual's bonus payout percentage, determined in
accordance with the individual's performance rating as specified under the Plan.

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                     APPENDIX F (Pursuant to Paragraph 8(d)

                           COVANCE CORPORATE EMPLOYEE
                                BONUS CALCULATION


Example:

        Pre-tax and Pre-Bonus Income = $108,300,000
        Bonus Pool = $23,350,000
        1x Bonus Pool = $21,900,000(1)
        Employee's Base Pay = $100,000
        Employee's Bonus Percentage Target = 30%
        Employee's Bonus Target Amount = $30,000
        Employee's Performance Rating = 120%

<TABLE>
<S>           <C>  
  Variable
Compensation
    Award = (Actual Bonus Pool) x (Employee's Bonus Target Amount) x  (Employee's Performance Rating)
            ------------------
             1 x Bonus Pool
 
   Variable
Compensation
    Award = ($23,350,000) x ($30,000) x (1.2)
             -----------
            ($21,900,000)
</TABLE>

Variable Compensation Award = (1.066)  x ($30,000) x (1.2)  = $38,376.56(2)

(1) This assumes, in reference to Appendix A, that there are fewer employees on
the bonus payment date than budgeted at the time Appendix A was adopted or that
there has been higher turnover than budgeted, or that there is a less costly mix
of wages and salaries than budgeted. 

(2) This example assumes that no proration was required because of inflated 
performance assessments as specified in Paragraph 8(h) of the Plan.
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