Exhibit 10.39


                                  COVANCE INC.
                           VARIABLE COMPENSATION PLAN
                            Effective January 1, 2002

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 the accomplishments of participating employees of Covance Inc.
         ("Covance") and its subsidiaries (collectively, the "Company") in
         achievement of company performance versus targets. The Plan does not
         constitute an amendment, supplement or modification of any individual
         employment agreement between the Company and an employee.

2.       Eligibility: Variable compensation awards under the Plan may be made to
         individuals who are full-time or part-time employees of the Company
         (including executives of the Company) provided that:

         (a)      The employee is employed with the Company on or before October
                  1 of the performance year in question; provided, however, that
                  in the event an individual commences employment with the
                  Company after October 1 of the performance year in question
                  but otherwise satisfies the eligibility or performance
                  requirements of the Plan, then a variable compensation award
                  may be made upon the Chief Executive Officer's ("CEO")
                  recommendation. If the employee commences employment with the
                  Company 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.

         (b)      In the case of Individual Contributor employees (as defined in
                  Appendix 2), the employee is employed by the Company on
                  December 15 of the performance year and, in the case of other
                  employees, the employee is employed by the Company both on
                  December 31 of the performance year and on the payment date
                  (usually mid-March of the following calendar year), provided,
                  however, that (i) in the event an employee leaves the Company
                  as a result of death or disability the employee shall be
                  eligible for an award which 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; and (ii) in the event a
                  Manager/Supervisor or Key Executive employee's employment is
                  terminated by the Company due to a reduction in force between
                  December 31 and the payment date, the employee shall be
                  eligible for an award.

         (c)      With respect to Individual Contributor employees, the employee
                  is in good standing, not on probation or involved in a formal
                  work improvement program on the payment date; and

         (d)      The employee is not eligible to participate in any other
                  Company variable compensation plan, sales compensation plan or
                  other similar plan.

3.       Administration/Disputes: The Compensation and Organization Committee of
         the Covance Board of Directors (the "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 such policies, rules and regulations that
         it deems necessary for governing, managing or administering the Plan.
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         To the extent consistent with the Company's Amended and Restated
         Certificate of Incorporation, no member of the Committee shall be
         liable for any action or determination with respect to the Plan, and
         the members shall be entitled to indemnification and reimbursement in
         the manner provided in the Company's Amended and Restated Certificate
         of Incorporation, as amended, modified or supplemented from time to
         time. In the performance of its functions under the Plan, the Committee
         shall be entitled to rely upon information and advice furnished by the
         Company's officers, accountants, counsel and any party the Committee
         deems necessary, and no member of the Committee shall be liable for any
         action taken or not taken in reliance upon any such advice. 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.

4.       Performance Year: The plan year is from January 1 through December 31.

5.       Performance Targets:
         (a)      Business Units. The CEO shall propose for the approval of the
                  Committee the performance targets for each Business Unit of
                  the Company, including Covance Corporate (see Appendix 1 for a
                  list of units for the 2002 performance year). The performance
                  targets shall be based on pre-bonus operating margin, or such
                  other financial targets as the Committee shall determine.
                  Corporate HR and Finance shall maintain a copy of the
                  objectives.

         (b)      Individual Objectives. The Committee shall approve the
                  objectives for the performance year of the 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
                  Officers, such objectives shall be based on a variety of
                  performance measures, such as operating margin, and measures
                  of customer satisfaction and operational and people
                  excellence.

         (c)      Percentage Payout. The Committee shall establish performance
                  pool percentage payouts setting the percentage payout level,
                  including the lowest and highest percentage payout that the
                  pool will pay out for actual business unit results against
                  target for each category of employee participating in the
                  Plan.

         (d)      Bonus Target Percentages. The Committee shall review bonus
                  target percentages for each category of participating
                  employee. The target is reflected as a percentage of an
                  employee's base pay earned during the performance year in
                  question (the "Employee Bonus Percentage"). 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".

         (e)      Performance Assessment Categories. The CEO shall establish,
                  and the Committee shall review, performance assessment
                  categories and the impact of such performance assessment on
                  such individuals' variable compensation award, if any, under
                  the Plan.

6.       Determination of Business Unit Bonus Pools and Total Bonus Pool: The
         Committee shall certify the Business Units' financial results and
         approve the amount of the total Bonus Pool before the payment of any
         variable compensation under the Plan; provided, however, that for the
         purpose of determining the awards to Individual Contributor employees,
         the CEO shall estimate the Business Unit financial results based on
         performance through November 30 of the performance year in question.
         Payout shall be made to such employees on the basis of such estimates.
         The total Bonus Pool shall be the aggregate of the bonus pools for all
         of the Business Units determined in accordance with Section 5. The

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<PAGE>

         Committee shall also determine whether the objectives of the CEO have
         been satisfied for the performance year in question. The CEO shall
         assess the performance of his executive management, including the
         Corporate Senior Vice Presidents, compared to their applicable
         objectives for the performance year in question and shall, at the
         Committee's request, review such assessments with the Committee.

7.       Bonus Pool Allocations:
         (a)      Individual Contributor Awards. The variable compensation award
                  for Individual Contributor employees shall be determined by
                  considering the employee's Business Unit's performance
                  compared to its Financial Target, the bonus payout percentage
                  represented by such results (the "Business Unit Target
                  Percentage"), and the employee's Employee Bonus Percentage.

         (b)      Managers/Supervisors and Key Executive Management. The
                  variable compensation award for Manager/Supervisor employees
                  and Key Executive/Executive Management employees shall be
                  determined by considering the employee's Business Unit Target
                  Percentage, the employee's Employee Bonus Percentage and
                  individual performance assessment; 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 for a performance year exceed such
                  Business Unit's bonus pool.

         (c)      General Manager Discretionary Awards. Each Business Unit
                  General Manager and, in the case of Covance Corporate, the
                  CEO, shall have the discretion and authority to allocate an
                  additional amount equal to up to 5% of the Business Unit bonus
                  pool or such greater amount as the Committee shall authorize
                  in any performance year (the "Discretionary Bonus") to any
                  plan participant(s) who is not a Corporate Vice President or
                  higher based on his/her sole and absolute judgment that such
                  individual or entity has made a significant contribution to
                  the Company's success or for some other important business
                  reason. Such Discretionary Bonus shall not be paid until all
                  other amounts payable under the Plan have been paid.

         (d)      Special Incentive Pool. In the event a Business Unit exceeds
                  its performance target, a special incentive pool shall be
                  established from which additional incentive awards shall be
                  made to Key Executives/Executive Management, provided,
                  however, that members of the Global Leadership Council (which
                  shall include the CEO and all Corporate Senior Vice
                  Presidents) and recipients of performance shares under the
                  Employee Equity Participation Plan during the performance year
                  in question shall not be eligible for awards from the Special
                  Incentive Pool.

8.       Adjustments:
         (a)      Discretionary Adjustments. The CEO or the Committee, as
                  applicable, may in calculating the amount of the total Bonus
                  Pool and Bonus Pool for each Business Unit as of the end of
                  the performance year in question and assessing whether the
                  financial targets and objectives, in each case, have been
                  satisfied, in whole or in part, as applicable, or exceeded on
                  a basis consistent with circumstances existing when such
                  financial targets and objectives, in each case, were
                  established include or exclude, as applicable, the effect on
                  the financial targets and objectives 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 litigation, or any other unexpected
                  or unforeseen extraordinary event or occurrence during the
                  performance year.

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<PAGE>

         (b)      Prorations. In furtherance of the second proviso of Paragraph
                  7(a), 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 Bonus Pool for any Business Unit for the performance year
                  in question.

9.       Payment Dates: Awards shall be paid no later than December 15 of the
         applicable performance year for the Individual Contributor employees
         and no later than March 15 following the close of the applicable
         performance year for the Manager/Supervisors and Key
         Executive/Executive Management employees. Awards are subject to all
         applicable tax laws and withholding requirements.

10.      Earned Base Pay: For purposes of the Plan, earned base pay is defined
         as the cumulative base salary paid to an employee during the Plan year.
         Because Individual Contributor awards shall be paid out before the end
         of the Plan year (mid-December of the Plan year), earned base pay will
         be defined as cumulative base salary paid up to Mid-November plus an
         estimated amount of earned base pay for the remainder of the Plan year,
         using the formula stated below:

         (Cumulative Earned Salary) + (Per Pay Period Salary times the # of Pay
         Periods Remaining in Plan Year)

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 ACCORDNACE WITH THE LAWS OF SAID STATE; PROVIDED, HOWEVER,
         THAT ALL MATTERS OF CORPORATE GOVERNANCE AND OTHER CORPORATE MATTERS
         CONCERNING DELAWARE CORPORATION 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, or 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 no reason or if they are terminated for
         any reason or no reason prior to the date the variable compensation is
         actually paid for the performance year in question, except where
         otherwise provided in Paragraph 2 hereof. Without limiting 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 Business Integrity Plan, including the code of
         conduct, will forfeit all rights to payment under this Plan.

13.      Amendment, Suspension, or Termination: The Board or Committee may, at
         any time, suspend, terminate, waive or amend the Plan (or provisions
         hereof, as applicable), 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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<PAGE>

14.      Effective Date: The Plan will take effect as of January 1, 2001 and
         supersedes in its entirety the Covance Inc. Variable Compensation Plan
         approved on February 24, 2000 (and effective January 1, 2000), the
         Covance Inc. Variable Compensation Plan approved on February 25, 1999
         (and effective January 1, 1999), 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.

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<PAGE>

                                                                      Appendix 1

                COVANCE VARIABLE COMPENSATION PLAN BUSINESS UNITS
                          FOR ACCRUALS AND BONUS POOLS



o    Global Labs

o    Global Phase I Clinics

o    Global Consultancy

o    Research Products

o    Global Central Labs

o    Central Diagnostics

o    ITMS

o    Global Clinical Phase II & III

o    Periapproval Services

o    CHEOS

o    Corporate
<PAGE>

                                                                      Appendix 2

                             Effect of Business Unit
                             -----------------------
                        Performance on Individual Payouts
                        ---------------------------------

Employee categories shall be determined by the General Manager of each Business
Unit (except for Key Executive/Executive Management employees who shall be
determined by the Global Leadership Council). Category guidelines and payout
percentages are set forth below.

     Individual Contributor* - generally defined as:
     1.  Clerical, administrative, support-type positions
     2.  For US employees - Non-exempt status
     3.  No supervisory responsibilities
     4.  Generally, employees at a target bonus of five percent or less

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------
      Business Unit Pre-Bonus Operating Margin     Percentage Bonus Payout of Target

     --------------------------------------------------------------------------------
<S>                                                              <C>
               Less than 90% of target                            80%
     --------------------------------------------------------------------------------
               90% to 110% of target                             100%
     --------------------------------------------------------------------------------
               More than 110% of target                          120%
     --------------------------------------------------------------------------------
      *Individual performance assessment does not influence payout
</TABLE>

     Manager/Supervisor - generally defined as:
     1.  Professional, managerial and/or technical expertise
     2.  For US employees, Exempt status
     3.  May have supervisory responsibilities
     4.  Employees for whom clear personal objectives are set
     5.  Leadership position within the business unit

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------
      Business Unit Pre-Bonus Operating Margin     Percentage Bonus Payout of Target

     --------------------------------------------------------------------------------
<S>                                                              <C>
                 0% to 80% of target                              75%
     --------------------------------------------------------------------------------
                 100% of target                                  100%
     --------------------------------------------------------------------------------
                 120% of target                                  125%**
     --------------------------------------------------------------------------------
</TABLE>

     Key Executive/Executive Management - Corporate Officers and select senior
     management employees to be determined annually by the Global Leadership
     Council (GLC).

<TABLE>
<CAPTION>
     --------------------------------------------------------------------------------
      Business Unit Pre-Bonus Operating Margin     Percentage Bonus Payout of Target

     --------------------------------------------------------------------------------
<S>                                                              <C>
              0% to 80% of target                                 65%
     --------------------------------------------------------------------------------
              100% of target                                     100%
     --------------------------------------------------------------------------------
              115% or greater of target                          125%
     --------------------------------------------------------------------------------
     *Incremental payout rate between minimum and maximum is linear for the
     Manager/Supervisor and Key Executive/Executive Management categories.
     **The maximum for Senior Managers is exclusive of any payouts under the
     Special Incentive Pool.
</TABLE>