Restricted Unit Plan For Non-employee Members of

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Exhibit 10.1


RESTRICTED UNIT PLAN FOR NON-EMPLOYEE MEMBERS OF
THE BOARD OF DIRECTORS OF COVANCE INC.


ARTICLE I

INTRODUCTION


1.01. Name of Plan.

This Plan shall be known as the Restricted Unit Plan for Non-Employee Members of the Board of Directors of Covance Inc.

1.02. Purpose of Plan.

The purpose of the Plan is to benefit the shareholders of Covance Inc. by increasing the proprietary interests of non-employee directors of Covance Inc. in the growth and success of Covance Inc. through the provision of Hypothetical Shares representing monetary compensation linked in value to the value of Covance Common Stock.


ARTICLE II

AWARDS AND PAYMENT ELECTIONS


2.01. Awards.

(a) On May 20, 2003, each non-employee director of Covance Inc. who is a member of the Board on that date shall receive an Award of five thousand (5,000) Hypothetical Shares. On every third anniversary of May 20, 2003, each non-employee Director who is a member of the Board on that date shall receive an Award of such number of Hypothetical Shares as is approved by the Board in advance of such date.

(b) Any person, who becomes a non-employee member of the Board after the date of one Award and before the next Award, shall receive an Award in an amount equal to the number of months such person is a Director prior to the next award date, divided by thirty-six (36), and multiplied by the number of Hypothetical Shares most recently granted pursuant to paragraph 2.01(a) hereof.

(c) Notwithstanding any other provision of the Plan, no individual shall be eligible to receive an Award under this Plan unless, on the Award Date, he or she is a member of the Board and is not an employee of Covance Inc. or any Subsidiary or Affiliate thereof. Each Award shall vest and be non-forfeitable three years from the Award Date provided the director has remained on the Board continuously through the vesting date; provided, however, that Awards granted pursuant to paragraph 2.01(b) shall have the same vesting date as the most recent Awards granted pursuant to paragraph 2.01(a). In the event a director ceases to be a director at any time prior to vesting, the Award shall be forfeited, provided that, notwithstanding the foregoing, (i) the Award shall vest in the event that the Director dies before the vesting date and has remained on the Board continuously from the Award Date through the vesting date, and (ii) the Board may approve decisions in individual cases to allow vesting in such an event.

2.02. Payment Elections.

(a) Express Election. A director who receives an Award pursuant to Section 2.01 may submit an election to the General Counsel of Covance Inc. or his/her successor or designee ("General Counsel") that shall satisfy each of the requirements set forth in paragraphs (1) through (5), below.

(1) Deadline for Submitting Election. A director's election with respect to an Award shall be submitted on or before September 30 of the year of Award, except that any Director receiving an Award pursuant to Section 2.01(b) may submit such election within four months of receiving such Award, but in any event no later than 12 months before the vesting date.

(2) Form of Election. The election shall be in writing and in a form reasonably acceptable to the General Counsel.

(3) Payment Commencement Date. The election shall specify whether the Director wishes to defer payment and, if so, the date, selected by the director in accordance with Section 4.02, on which payments with respect to the Award are to commence under the Plan ( i.e., any date on or after his Release Date).

(4) Method of Payment. The election shall specify the method, selected by the director in accordance with Section 4.03, in which payments with respect to the Award are to be made under the Plan ( i.e., whether such payments are to be made in the form of a lump sum, or annual installments).

(5) Election Irrevocable. The payment commencement date and the method of payment elected by a director with respect to an Award pursuant to paragraphs (3) and (4), above, shall not be revocable or subject to modification at any time. Notwithstanding the foregoing, a director may at any time submit a request to the General Counsel to modify the payment commencement date, the method of payment, or both, with respect to the Award, provided that the modification does not become effective before the director's Release Date, and provided further that the request is submitted before any payment is made to the director with respect to the Award pursuant to Article IV. If the modification has the effect of accelerating all or part of any payment otherwise due the director under Article IV, the request shall be subject to the approval of the General Counsel, which approval the General Counsel may grant or deny in his sole discretion. If the modification has the effect of deferring until a later calendar year all or part of any payment otherwise due the director under Article IV, the request shall be granted to the extent of such deferral, provided that the request is submitted on or before the last day of the calendar year immediately preceding the calendar year in which the payment otherwise would have been made to the director under Article IV and at least four months before the payment would otherwise have been made to the director. If the modification has the effect of deferring until a later date within the same calendar year all or part of any payment otherwise due the director under Article IV during such calendar year, the request shall be granted to the extent of such deferral, provided that the request is submitted before the date on which the payment otherwise would have been made to the director under Article IV. A director may, in his sole discretion, specify that his request for a modification pursuant to this paragraph (5) be submitted to the Board or the Committee for its prior approval.

(b) Default Election. A director who fails to make an express election with respect to an Award in accordance with subsection (a), above, shall be deemed to have made the same election as his or her previous election under this Plan. If such director has not made any previous election under this Plan the director shall be deemed to have elected not to defer compensation hereunder and shall be paid all amounts due in cash on the date of vesting of the Award under Section 2.01 hereof. A deemed election pursuant to this subsection (b) shall not be revocable or subject to modification except in accordance with the provisions of subsection (a)(5), above.

2.03. Designation of Beneficiaries.

A director who receives an Award pursuant to Section 2.01 may designate one or more beneficiaries under the Plan with respect to such Award. Notwithstanding Section 2.02(a)(5), a director may, at any time, revoke a prior designation and make a new designation pursuant to this Section 2.03. Any such designation or revocation shall be in writing and shall be submitted to the General Counsel in such form and in such manner as is reasonably acceptable to the General Counsel. If a director dies before he has received all payments due him under the Plan, the remaining payments shall be made, in a lump sum, to his beneficiaries, or, if there is no such beneficiary, then to the director's estate as promptly as practicable following the director's death.


ARTICLE III

ACCOUNTS AND INVESTMENTS


3.01. Accounts.

(a) Establishment of Accounts. A separate account shall be maintained for each director who receives an Award pursuant to Section 2.01. Such account shall be (1) credited with the Awards granted to the director pursuant to Section 2.01, (2) credited (or charged, as the case may be) with the investment results determined pursuant to Section 3.02, and (3) charged with the amounts paid by the Plan to or on behalf of the director pursuant to Article IV.

(b) Subaccounts. Within each director's account, separate subaccounts shall be maintained to the extent necessary for the administration of the Plan. For example, it may be necessary to maintain separate subaccounts where the director has specified different payment commencement dates or different methods of payment with respect to his Awards.

3.02. Investments.

(a) Deemed Investment in Covance Common Stock. In the event a director elects deferral hereunder, until the director's Release Date, the entire balance in his account shall be treated as if it were invested in Covance Common Stock. The deemed investment in Covance Common Stock of all or part of the balance in a director's account shall be determined in accordance with the following rules:

2

(1) Deemed Reinvestment of Dividends. The number of hypothetical shares of Covance Common Stock credited to a director's account shall be increased on each date that a dividend is paid on Covance Common Stock. The number of additional hypothetical shares of Covance Common Stock credited to a director's account as a result of such increase shall be determined, first, by multiplying the total number of hypothetical shares of Covance Common Stock credited to the director's account immediately before such increase by the amount of the dividend paid per share of Covance Common Stock on the dividend payment date, and, then, by dividing the product so determined by the closing price of Covance Common Stock on the composite tape of New York Stock Exchange issues on the dividend payment date (or if there was no reported sale of Covance Common Stock on such date, on the next preceding day on which there was such a reported sale).

(2) Conversion Out of Covance Common Stock. The dollar value of the hypothetical shares of Covance Common Stock credited to a director's account on any date shall be determined by multiplying the number of hypothetical shares of Covance Common Stock credited to the director's account on that date by the average closing price of Covance Common Stock, as reported on the composite tape of New York Stock Exchange issues for the most recent 10 business days ending before that date.

(3) Effect of Recapitalization. In the event of a transaction or event described in this paragraph (3), the number of hypothetical shares of Covance Common Stock credited to a director's account shall be adjusted in such manner as the Board, in its sole discretion, deems equitable. A transaction or event is described in this paragraph (3) if and only if (A) it is a dividend or other distribution (whether in the form of cash, shares, other securities, or other property), extraordinary cash dividend, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of shares or other securities, the exercisability of stock purchase rights received under the Rights Plan, the issuance of warrants or other rights to purchase shares or other securities, or other similar corporate transaction or event, and (B) the Board determines that such transa ...