Document:

EXHIBIT 10.509

 

DESCRIPTION OF CHIRON
CORPORATION’S

2005 EXECUTIVE OFFICERS
VARIABLE COMPENSATION PROGRAM

 

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

 

The Compensation Committee and, with respect to the
Chairman 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 cash
compensation should be competitive as well as performance based and that a
significant portion of cash compensation should be “at risk”. The Committee’s
stated target for base salary for prior years was generally at the 60th
percentile of the market. In keeping with the Committee’s performance based
focus on cash compensation, in general the salary adjustments made in 2005 and
2006 placed executive officer base salaries at or below the 50th
percentile of the market.

 

Under Chiron’s Annual Incentive Plan,
executives earn cash bonus compensation based on achievement of pre-established
Company, business unit and function or corporate unit performance goals and
based upon their individual performance. For 2005, the performance measures
were based on revenue and earnings per share metrics and non-financial
milestones relating to creation of long-term shareholder value. Variable
cash compensation for executive officers overall was targeted to yield total
cash compensation at the 50th percentile. The Committee retains its
philosophy that annual variable cash compensation awards are used to provide
the potential to bring total cash compensation substantially over the 50th
percentile of the market when individual, business unit and overall company
performance are substantially above target.

 

Each participant’s target award is a percentage of
that employee’s base salary.  In addition
to the Company measurements, each of the business unit presidents is also
measured on the financial performance of his or her business unit (on the basis
of revenue and operating income) and specific research, development and
commercial milestones which are sector specific, and which focus on priorities
within each organization for this year. If performance objectives are met, the
Named Executive Officers are eligible, at the discretion of the Compensation
Committee, for a cash bonus based on the following percentage of their annual
base salary:  CEO – 120%; President and COO – 100%; Presidents of
Businesses – 100%; General Counsel – 75%. The Compensation Committee approves
the bonus targets, measurement criteria and final determination of success
against the measurements.

 

In determining participant awards for 2005, the
Committee 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 business
or corporate unit and individual performance.

 

The Compensation Committee reserves the right to
modify executive officer variable compensation if, in its sole discretion, it
determines that executive officer performance or Company performance warrant
such modifications.

 

2Exhibit
10.510

 

PERSONAL AND CONFIDENTIAL

 

                   
    , 200   

 

«First_Name» «Last_Name»

«JOB_TITLE»

Chiron Corporation

«ADDRESS», M/S «MS»

«CITY_STATE_ZIP»

 

Re: Deferred
Share Units Grant

 

Dear: «First_Name»

 

As you are aware,
Novartis AG is in the process of acquiring Chiron Corporation ( the “Company”)
pursuant to a merger agreement dated October 30, 2005 (the “Novartis
Acquisition”). I am pleased to inform you that you have been granted a deferred
share units award (the “Award”) with respect to                    
«Shrs_Grntd» («Shrs_Grntd_Wrds») of Company common stock (“Common Stock”)
payable in shares of Common Stock or in cash as described below. The Award was
granted on                         ,
200    (the “Grant Date”) pursuant to the Chiron Corporation
2004 Stock Compensation Plan (the “Plan”) in accordance with the restrictions,
terms, and conditions hereinafter set forth and is in all respects limited and
conditioned by the provisions of the Plan.

 

1.             The
Award will vest in four (4) equal, successive annual installments upon
completion of each year of employment with the Company over the four (4)-year
period measured from the Grant Date, subject to accelerated vesting as set
forth below.  Each date on which the
Award vests is referred to as a “Vesting Date”.

 

2.             The
Award will entitle you to receive, upon each Vesting Date (provided your Award
has not been terminated or canceled before such date in accordance with the
provisions below), a payment in shares of Common Stock or cash depending on
whether the Vesting Date occurs prior to, or on or after the consummation of
the Novartis Acquisition (the “Novartis Closing”). To the extent the Vesting
Date occurs prior to the Novartis Closing, you will receive the number of
shares of Common Stock with respect to which your Award vests on such date. Upon
the Novartis Closing, your Award will be assumed by Novartis and will
automatically convert into a right to receive a cash payment on each Vesting
Date (to the extent the Award has not been terminated or canceled before such
date). The amount of the cash

 

 

payment for each share
under the Award that vests on such date will be equal to the consideration paid
in the Novartis Acquisition for each share of Common Stock. Accordingly, to the
extent the Vesting Date occurs on or after the Novartis Closing, you will
receive a cash payment equal to the product of (i) the consideration paid in
the Novartis Acquisition for each share of Common Stock and (ii) the number of
shares with respect to which the Award vests on such date. In no event will you
be entitled to receive any shares of Common Stock or any other securities under
this Award on or after the Novartis Closing.

 

3.             If
you voluntarily terminate employment with the Company for any reason or if the
Company terminates your employment before a Vesting Date, subject to paragraphs
8 and 9 below, your Award will be canceled automatically and no shares of
Common Stock or cash will be issued thereunder.

 

4.             The
issuance of shares of Common Stock or cash under the Award is subject to
satisfaction of all tax withholding obligations with respect to such shares or
cash and you agree to make appropriate arrangements with the Company to satisfy
all such obligations. Unless you elect in writing to satisfy such obligations
by payment in cash before issuance of any shares under your vested Award, the
number of shares of Common Stock which you would otherwise be entitled to
receive on any Vesting Date will be reduced by that number of whole shares
which, as of that date, has an aggregate Fair Market Value (as defined in the
Plan) equal to the total amount of tax withholding obligations applicable to
the shares issuable on that date. To the extent that the payment on any Vesting
Date is payable in cash, the amount of your payment will be reduced by the
total amount of tax withholding obligations applicable to such payment.

 

5.             Your
Award hereunder may not be sold, assigned, transferred, alienated, subject to
garnishment or otherwise encumbered in any manner other than by transfer, to
the extent provided below, by will or the laws of descent and distribution. In
the event of your death prior to the issuance of shares of Common Stock or cash
under your Award, any shares or cash issuable thereunder by reason of your
death will pass pursuant to your will or by the laws of descent and
distribution.

 

6.             The
issuance of shares of Common Stock hereunder shall be subject to compliance by
the Company and you or your beneficiary with all applicable requirements of law
relating thereto and with all regulations of any stock exchange on which the
Common Stock may be listed at the time of such issuance.

 

7.             Except
as otherwise provided with respect to a Novartis Acquisition in paragraph 2, if
the Company or its stockholders enter into an agreement to dispose of all or
substantially all of the assets of the Company, enter into an agreement to
merge or consolidate with another entity, or enter into a plan of
reorganization or liquidation, while your Award is unvested, then the Award
will become vested and paid in full, immediately before the consummation of
such transaction. However, no such acceleration of the vesting or payment

 

2

 

date will occur if the
agreement requires as a prerequisite to the consummation of any such
transaction that each such outstanding Award will be either assumed by the
successor corporation or parent thereof or be replaced with a comparable award
in the successor corporation or parent thereof.

 

8.             If
there is a Qualifying Termination of your employment following the Novartis
Closing, then the Award, to the extent unvested at the time of such Qualifying
Termination, will vest and will be paid out in full in cash.

 

9.             If
there is a Change in Control of the Company (other than the Novartis
Acquisition) pursuant to which the Award continues and within twenty-four (24)
calendar months thereafter there is a Qualifying Termination of your
employment, then the Award to the extent unvested at the time of such
Qualifying Termination, will vest and will be paid out in full.

 

10.           For
this letter agreement, the following definitions apply:

 

a.             “Change
in Control” of the Company shall be deemed to have occurred as of the first day
that any one or more of the following conditions is satisfied and regulatory
approval has been granted if necessary:

 

(i)            The
“beneficial ownership” (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of securities representing more than thirty percent (30%) of the
combined voting power of all securities of the Company is acquired, directly or
indirectly, by a Person (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or an
affiliate thereof, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company); or

 

(ii)           During
any period of two (2) consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in i. above) whose
election by the Board of Directors or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or

 

(iii)          The
stockholders of the Company approve a definitive agreement to sell or otherwise
dispose of all or substantially all of its assets, or adopt a plan for
liquidation, provided that such sale or liquidation has not been abandoned.

 

Notwithstanding anything
else contained herein to the contrary, in no event shall a Change in Control be
deemed to have occurred by reason of a purchase, or series of purchases of
Company

 

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stock by Novartis or its
successor such that the acquiring entity remains subject to the terms of that
certain Governance Agreement dated as of November 20, 1994, as amended,
provided the acquiring entity’s Company stock holdings, direct or indirect, in
the aggregate, represent less than seventy-nine and nine-tenths of a percent
(79.9%) of the combined voting power of all outstanding Company securities. In
addition, in no event shall a Change in Control be deemed to have occurred, with
respect to you, if you are part of a purchasing group that
consummates the Change-in-Control transaction. You shall be deemed “part of a
purchasing group” for purposes of the preceding sentence if you are an equity
participant in the purchasing company or group (except for: (i) passive
ownership of less than three percent (3%) of the stock or other equity of the
purchasing company; or (ii) ownership of equity participation in the purchasing
company or group which is otherwise not significant, as determined prior to the
Change in Control by a majority of the nonemployee continuing Directors).

 

b.             “Qualifying
Termination” means: (i) an involuntary termination of your employment by the
Company for reasons other than Cause, death or permanent disability or (ii) a
voluntary termination by you for Good Reason pursuant to a written notice of
termination delivered to the Company; provided that, if upon receiving such
notice of termination, the Company requests that you remain an employee for a
period ending no later than six (6) months following the date of the Change in
Control or the Novartis Closing, as applicable (the “Transition Employment
Period”) with compensation and benefits equal to or greater than your
compensation and benefits immediately before the Qualifying Termination (or, if
more favorable to you, immediately before the Change in Control or the Novartis
Closing, as applicable), you will not be deemed to have a Qualifying
Termination unless you remain employed throughout the Transition Period or your
employment earlier terminates due to death, disability or involuntary
termination by the Company for reason other than Cause.

 

c.             “Cause”
means:

 

(i)            Your
willful failure to substantially perform your duties with the Company (other
than any such failure resulting from disability);

 

(ii)           Your
material act of dishonesty, fraud or embezzlement against the Company,
unauthorized disclosure of confidential information or trade secrets of any of
the Company or an affiliate (whether or not in violation of any confidentiality
agreement) or other willful conduct (other than conduct covered under (i)
above) that is demonstrably injurious to the Company, monetarily or otherwise;
or

 

(iii)          Your
having been convicted of a felony.

 

For purposes of this subparagraph, no act, or failure
to act, on your part shall be deemed “willful” unless done, or omitted to be
done, by you not in good faith and without reasonable belief that the action or
omission was in the best interests of the Company.

 

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d.             “Good
Reason” shall mean, without your
express written consent, the occurrence of any one or more of the following
within twenty-four (24) months following the Change in Control or Novartis Closing,
as applicable;

 

(i)            The assignment of you to duties materially
inconsistent with your authorities, duties, responsibilities as an employee of
the Company, or a material reduction in the nature or status of your
authorities, duties, or responsibilities from those in effect immediately preceding
the Change in Control or the Novartis Closing, as applicable;

 

(ii)           The Company’s requiring you to be based at a
location which is at least fifty (50) miles further from your current primary
residence than is such residence from the Company’s current headquarters,
except for required travel on the Company’s business to an extent substantially
consistent with your business obligations as of the effective date of the Change
in Control or the Novartis Closing, as applicable;

 

(iii)          A material reduction in your base salary or
bonus opportunity as in effect on the effective date of the Change in Control or
the Novartis Closing, as applicable or
as the same shall be increased from time to time;

 

(iv)          A material reduction in your level of
participation in any of the Company’s short- and/or long-term incentive
compensation plans, or employee benefit or retirement plans, policies,
practices, or arrangements in which you participate immediately preceding the
Change in Control or the Novartis Closing, as applicable; provided, however, that reductions in the
levels of participation in any such plans shall not be deemed to be “Good
Reason” if your reduced level of participation in each such program remains
substantially consistent with the average level of participation of other
employees who have positions commensurate with your position. Long-term
incentive plans shall mean the Chiron Executive Long-Term Incentive Plan, the
2004 Stock Compensation Plan (formerly, the 1991 Stock Option Plan), and any
other similar plans instituted by the Company.

 

However, the occurrence of
an event set forth in (i) through (iv) above shall not constitute Good Reason
if the Company has cured such event within fifteen (15) days of receipt of
written notice from you that such event has occurred and constitutes Good
Reason.

 

11.           In
the event any change is made to the Common
Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, or other change in corporate or capital structure of the Company
affecting the outstanding Common Stock as a class without the Company’s receipt
of consideration but excluding the Novartis Acquisition) then, unless such
change results in the termination of your Award, the number and/or class
of securities subject to your Award will be appropriately adjusted to preclude
any dilution or enlargement of your rights under the Award.

 

12.           Neither
you nor, in the event of your death, your beneficiary shall have any rights as
a shareholder with respect to the shares of Common Stock issuable hereunder
until you

 

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shall have been issued a
stock certificate for such shares. It is the intention of the parties that the
Company’s obligations under your Award are unfunded for purposes of the
Internal Revenue Code and that the Employee Retirement Income Security Act of
1974 does not apply to your Award.

 

13.           The
Compensation Committee, may, in its discretion, modify or waive any or all of
the terms, conditions or restrictions hereof, provided, however, that no such
modification or waiver may, without your or, if applicable, your beneficiary’s
consent, adversely affect the rights of you or your beneficiary hereunder.

 

14.           The
Compensation Committee has full authority to administer the Plan, including
authority to interpret and construe any provision thereof and hereof and to
adopt such rules and regulations for administering the Plan as it may deem
necessary. Decisions of the Compensation Committee are final and binding on all
persons who have an interest in the Plan.

 

15.           This
grant shall not constitute a contract of employment. The Company (or any
subsidiary employing you) may terminate or change the terms of your employment
at any time and for any reason and whether or not such termination or change
causes a loss of rights under the Plan or this Award, except to the extent that
the terms of any employment contract or, with respect to changes in your
compensation, any written compensation agreement between the Company and you
may expressly provide otherwise.

 

16.           For
purposes of this Award, the term “Company” shall include any successor.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  CHIRON CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Howard H. Pien

  
	
   

  	
   

  	
  Chief Executive Officer;

  
	
   

  	
   

  	
  Chairman of the Board

  

 

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