SEVERANCE AGREEMENT


         THIS AGREEMENT, made this 2nd day of February, 1998, by and between
Pharmaceutical Product Development, Inc. ("PPD") and Fredric N. Eshelman
("Employee").

         WHEREAS, Employee is a valued employee of PPD and in order to induce
Employee to remain in the employ of PPD, PPD desires to provide the severance
benefits hereinafter described in the event of a "Change in Control", as
hereinafter defined, of PPD.

         NOW, THEREFORE, it is agreed as follows:

         1.       Definitions

                  a. "Change in Control" means a change of control of a nature
that would be required to be reported in response to Item 6(e) of Schedule 14A
of Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), provided that such a Change in Control shall be deemed
to have occurred if any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of PPD representing 50% or more of the combined voting
power of PPD's then outstanding securities.

                  b. "Constructive Termination" means a termination of
Employee's employment by PPD during the Covered Period initiated by Employee
after (i) a substantial diminution or alteration in the duties of Employee, (ii)
a reduction by PPD in Employee's base salary in effect on the date of the Change
in Control, or (iii) the relocation of Employee's primary work location to a
location that is more than twenty-five (25) miles from Employee's primary work
location prior to the Change in Control. Constructive Termination specifically
does not include termination of Employee by reason of death, Disability or
retirement at or after age 65. Employee shall give PPD written notice of a
Constructive Termination, which notice shall provide a brief description of the
circumstances which Employee asserts gives rise to a right of Constructive
Termination, and PPD shall have ten (10) days from receipt of said notice within
which to remedy said circumstances.

                  c. "Covered Period" means the time period commencing on the
date of and coincident with a Change of Control and ending one year thereafter.

                  d. "Disability" means the inability of Employee to perform his
assigned duties for PPD for a period of three (3) months due to Employee's
physical or mental illness as determined by a reputable medical doctor.
<PAGE>

                  e. "PPD" means Pharmaceutical Product Development, Inc. and
all of its subsidiaries and affiliated entities.

                  f. "Termination for Cause" means (i) an act or acts involving
fraud, embezzlement or theft from PPD, (ii) Employee's willful and repeated
failure to follow directions of the Board of Directors that continues for at
least ten (10) days following written notice of the Board of Directors of such
failure to follow directions, or (iii) termination for cause as defined in and
made pursuant to a then effective employment agreement, if any, between Employee
and PPD.

         2. Compensation Upon Change of Control. If during the Covered Period
(i) PPD terminates Employee's employment for reason other than Termination for
Cause or (ii) Employee's employment is terminated by reason of Constructive
Termination, Employee shall be entitled to the following compensation and
benefits:

                  a. PPD shall pay Employee a lump sum equal to Employee's W-2
compensation for the twelve (12) months ending on the last day of the month
preceding the month of Employee's termination, said sum to be paid within ten
(10) days after Employee's termination of employment.

                  b. PPD shall pay Employee any bonus or deferred compensation
(whether in the form of cash, stock or otherwise) accrued but unpaid as of
Employee's termination, said sum to be paid within ten (10) days after
Employee's termination of employment.

                  c. For a period of one year after Employee's termination of
employment with PPD, PPD shall continue to pay for and provide existing employee
welfare benefits which Employee is receiving as of the date of termination of
employment, including life insurance, health, medical, dental, vision and
wellness, accidental death and dismemberment and disability benefits; provided,
however, that PPD's obligations under this clause shall terminate from the date
that Employee first becomes eligible after termination of employment with PPD
for similar coverage under another employer's plan.

                  d. Notwithstanding anything to the contrary in any award
agreement for non-qualified stock options, (i) all unvested shares underlying
PPD non-qualified stock options granted more than six months prior to the date
of Employee's termination shall become fully vested as of the date of Employee's
termination, and (ii) Employee shall continue to be treated under each award
agreement as if he was an employee of PPD until the first to occur of (x) the
third anniversary of Employee's termination of employment, or (y) the expiration
of the exercise period provided for therein; provided, however, in the event of
Employee's death or his disability (as disability is defined in the award
agreement) after the date of Employee's termination of employment hereunder, the
time for exercise after death or such disability prescribed in the award
agreement shall apply. The provisions of this subsection shall also apply to any
and all substitute stock


                                        2
<PAGE>

options granted to Employee in exchange for Employee's PPD non-qualified stock
options to which this subsection applies.

         3.       Miscellaneous.

                  a. PPD will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of PPD, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that PPD would be required
to perform it if no succession had taken place.

                  b. This Agreement shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executives,
administrators, successors, heirs, distributees, devisees and legatees.

                  c. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
given (i) by certified mail, return receipt requested, postage prepaid, or (ii)
by recognized overnight carrier, and shall be deemed received when actually
received. Notices shall be addressed as follows:

                  If to PPD:       Pharmaceutical Product Development, Inc.
                                   3151 17th Street Extension
                                   Wilmington, North Carolina  28412
                                   Attention:    Chief Executive Officer


                  If to Employee:   Fredric N. Eshelman
                                    6814 Towles Road
                                    ---------------------
                                    Wilmington, NC  28409
                                    ---------------------



Either party hereto may change the notice address by giving notice thereof in
the same manner as provided for herein.

                  d. No waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any provision or condition of
this Agreement to be performed by such other party shall be deemed a subsequent
waiver of the same or similar provisions or conditions.

                  e. No agreements or representations, oral or otherwise,
expressed or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this agreement, and this
Agreement supersedes and replaces
                                       3

<PAGE>

in its entirety all prior agreements and representations, expressed, implied,
oral or otherwise, made by PPD to or with Employee.

                  f. This Agreement shall be governed by and interpreted under
the laws of the State of North Carolina.

                  g. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

                  h. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

                  i. All legal expenses incurred by Employee in the successful
enforcement of any of the terms of this Agreement shall be paid by PPD.

         IN WITNESS WHEREOF, the parties have executed this Agreement effective
the date first hereinabove set forth.



                                            PHARMACEUTICAL PRODUCT
                                            DEVELOPMENT, INC.



                                            By: /s/ Fred B. Davenport, Jr.
                                                ------------------------------
                                            Title: Vice President Legal
                                                   ---------------------------



                                            EMPLOYEE


                                            /s/ Fredric N. Eshelman
                                            -------------------------  (SEAL)
                                            Name: Fredric N. Eshelman