**EXHIBIT 10.509**

 

DESCRIPTION OF CHIRONCORPORATION’S

2005 EXECUTIVE OFFICERSVARIABLE COMPENSATION PROGRAM

 

Decisions on compensation (base salary and variablecompensation) of Chiron Corporation’s (“Chiron” or the “Company”) executiveofficers are made by the Compensation Committee of the Board of Directors.

 

The Compensation Committee and, with respect to theChairman and CEO, the Board of Directors met on February 16 and February 17,2006, respectively, and authorized base salary adjustments effective February 27,2006 and bonuses for 2005 performance for Named Executive Officers as of December 31,2005. The Compensation Committee believes that total annual cashcompensation should be competitive as well as performance based and that asignificant portion of cash compensation should be “at risk”. The Committee’sstated target for base salary for prior years was generally at the 60thpercentile of the market. In keeping with the Committee’s performance basedfocus on cash compensation, in general the salary adjustments made in 2005 and2006 placed executive officer base salaries at or below the 50thpercentile of the market.

 

Under Chiron’s Annual Incentive Plan,executives earn cash bonus compensation based on achievement of pre-establishedCompany, business unit and function or corporate unit performance goals andbased upon their individual performance. For 2005, the performance measureswere based on revenue and earnings per share metrics and non-financialmilestones relating to creation of long-term shareholder value. Variablecash compensation for executive officers overall was targeted to yield totalcash compensation at the 50th percentile. The Committee retains itsphilosophy that annual variable cash compensation awards are used to providethe potential to bring total cash compensation substantially over the 50thpercentile of the market when individual, business unit and overall companyperformance are substantially above target.

 

Each participant’s target award is a percentage ofthat employee’s base salary.  In additionto the Company measurements, each of the business unit presidents is alsomeasured on the financial performance of his or her business unit (on the basisof revenue and operating income) and specific research, development andcommercial milestones which are sector specific, and which focus on prioritieswithin each organization for this year. If performance objectives are met, theNamed Executive Officers are eligible, at the discretion of the CompensationCommittee, for a cash bonus based on the following percentage of their annualbase salary:  CEO – 120%; President and COO – 100%; Presidents ofBusinesses – 100%; General Counsel – 75%. The Compensation Committee approvesthe bonus targets, measurement criteria and final determination of successagainst the measurements.

 

In determining participant awards for 2005, theCommittee reviewed performance against the Company’s financial measurements,taking into account among other things the return of FLUVIRIN® to the U.S.market and the number of doses sold, and non-financial 

 

----

 

milestones for 2005, and took into account businessor corporate unit and individual performance.

 

The Compensation Committee reserves the right tomodify executive officer variable compensation if, in its sole discretion, itdetermines that executive officer performance or Company performance warrantsuch modifications.

 

2

----