COVANCE INC.
                           VARIABLE COMPENSATION PLAN

1. Purpose. The purpose of the Variable Compensation Plan (the "Plan") is to
reward participating employees of Covance Inc. ("Covance") and its subsidiaries1
(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
executives or managers (as designated by senior executives of Covance) who are
full-time employees 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 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 the performance year in question based
either on time worked or base pay earned and (b)

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(1) For 1997, Covance Biotechnology Services Inc. will not participate in the
    Plan, but will in subsequent years.

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

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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. Performance Goals.

   
   (a) Goal Setting. The Committee shall establish at the beginning of each
performance year, or soon as practicable thereafter, but in no event, later than
the date that is 90 days after the beginning of the performance year, objective
performance goal or goals, including, but not limited to, stock price, market
share, sales, earnings per share, return on equity, net profit after tax or
costs. Such performance goal may be based on one or more business criteria that
apply to the individual, a division, a business unit or operating group or the
Company.
    

   (b) Measurement. The Committee shall certify in writing before the payment of
any variable compensation under the Plan whether the performance goal(s) have
been satisfied for the performance year in question. Approved minutes of the
Committee shall satisfy the forgoing requirement. In assessing whether the
performance goal(s) have been satisfied, in whole or in part, or exceeded on a
basis consistent with circumstances existing when such goals were established,
the Committee may include or exclude, as applicable, the financial effect on the
performance goal(s) 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, strategic expenditures by the Company identified to the Covance
Board of Directors as such, force majure events, material litigation, changes in
tax laws or accounting practices, or any other unexpected or unforeseen
extraordinary event or

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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 performance goal(s) in question.

   
6. Variable Compensation Targets. The Committee will establish a variable
compensation target for each level of participating employee by name or category
of position reflected as a percentage of an employee's base pay in effect at the
end of the performance year in question. 

7. Variable Compensation Components Weightings. For all employees of the Company
eligible to participate in the Plan, the relative weightings of each component
of the Plan shall be established by the Committee.

8. Maximum Variable Compensation Award Payout. In no event shall any individual
receive more than the percent of such individual's variable compensation target
established by the Committee.
    

9. 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

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Employee Equity Participation Plan, or both. Payment will be made no later than
each February 28th following the close of the applicable performance year. The
Committee, in its discretion, may provide that individuals may elect to defer
payment of the variable compensation awards in the event the Company has
established a deferred compensation plan for employees.

10. 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.

11. 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, except as
otherwise provided in Paragraph 2 hereof. Without limitating the foregoing or
Paragraph 2 hereof, any individual whose employment is terminated for
wrongdoing, including, but not limited to, a violation of the Company's Code of
Conduct, will forfeit all rights to payment under this Plan.

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12.   Effective Date.  The Plan will take effect as of January 1, 1997.

13. 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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