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Exhibit 10.506    
  

 
 

Non-Employee Director    
  

 
 

CHIRON CORPORATION.
  June 27, 2002    
  

Dear
Non-Employee Director Stock Option Plan Participant: 

        I
am pleased to inform you that the Compensation Committee of the Board of Directors has approved an amendment to each of your outstanding stock options listed on Exhibit A (the
"Option") to provide you with greater protection in the event of a certain corporate transactions. 

        The
amendment is set forth in detail below. In general terms, the amendment does the following: 

        First,
the amendment provides that your Option will immediately vest upon a Qualifying Termination of your services that occurs within twenty-four (24) months after a
Change in Control. (See below for definitions.) 

        Second,
the amendment provides that your Option will vest immediately before certain corporate transactions if your Option will not
continue or be assumed by the successor corporation or replaced with a comparable option. Those transactions generally include a sale or disposition of all or
substantially all of the assets of the Corporation, a merger or consolidation with another entity or a reorganization or liquidation of the Corporation. Before the amendment, this protection was not
available for a stock acquisition or reorganization involving less than substantially all of the Corporation's capital stock. 

        Accordingly,
Section C of your stock option agreement applicable to your Option is hereby amended in its entirety to read as follows: 

        C. Change in Control.    If the Corporation or its stockholders enter into an agreement to dispose of
all or substantially all of the assets of the Corporation, enter into an agreement to merge or consolidate with another entity or enter into a plan of reorganization or liquidation, then this Option,
to the extent not previously exercised or terminated, may be exercised in full for fully vested shares immediately before the consummation of such sale, merger, reorganization or liquidation and all
unvested shares held by the Optionee shall then vest. However, no such acceleration will occur if the agreement requires that each outstanding option will be either assumed by the successor
corporation or its parent or replaced with a comparable option to purchase shares of capital stock of the successor corporation or parent thereof and the successor assumes the Corporation's repurchase
right on unvested shares. The committee appointed by the Board of Directors will determine such comparability, and its determination will be final, binding and conclusive. Upon consummation of the
sale, merger, reorganization or liquidation contemplated by the agreement, this Option, whether or not accelerated, will terminate and cease to be exercisable, unless assumed pursuant to a written
agreement by the successor corporation or parent thereof. This Agreement does not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

        Certain Terminations Following a Change in Control.    If there is a Change in Control of the
Corporation pursuant to which the vesting of the Option does not accelerate in full pursuant to the paragraph above and within twenty-four (24) calendar months thereafter there is a
Qualifying Termination of Optionee's Services, then this Option will become immediately exercisable for fully-vested Option Shares. For this purpose, the following definitions apply: 

 

        1.    A
"Change in Control" of the Corporation 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: 

        a.    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 Corporation is acquired, directly or indirectly, by a Person (other than the Corporation, any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation or an affiliate thereof, or any corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same
proportions as their ownership of stock of the Corporation); or 

        b.    During
any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation and any new
director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in i. above) whose election by the Board of Directors or
nomination for election by the Corporation'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 

        c.    The
stockholders of the Corporation 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
Corporation stock by Novartis or its successor such that the acquiring entity remains subject to the terms of that certain Governance Agreement dated as of January 5, 1995, as amended through
December 9, 2000, provided the acquiring entity's Corporation 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 Corporation securities. In addition, in no event shall a Change in Control be deemed to have occurred, with respect to the Optionee, if
the Optionee is part of a purchasing group that consummates the Change-in-Control transaction. The Optionee shall be deemed "part of a purchasing group" for purposes of the
preceding sentence if the Optionee is 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 non-employee continuing Directors). 

        2.    "Qualifying
Termination" means the termination of Optionee's Services in connection with: (i) Optionee's removal from the Board of Directors of the Corporation for
reasons other than Cause, (ii) Optionee's resignation from the Board of Directors of the Corporation at the request of the Corporation, other than for Cause, or (iii) the Optionee's
failure to be re-nominated or re-elected to the Board of Directors. 

        3.    "Cause"
means: 

        a.    The
Optionee's willful failure to substantially perform his/her duties with the Corporation (other than any such failure resulting from permanent disability), 

        b.    The
Optionee's material act of dishonesty, fraud or embezzlement against the Corporation, unauthorized disclosure of confidential information or trade secrets of any of
the Corporation or an affiliate (whether or not in violation of any confidentiality agreement) or other 

2

 

willful conduct (other than conduct covered under (i) above) that is demonstrably injurious to the Corporation, monetarily or otherwise; or 

        c.    The
Optionee's having been convicted of a felony. 

        For
purposes of this subparagraph, no act, or failure to act, on the Optionee's part will be deemed "willful" unless done, or omitted to be done, by the Optionee not in good faith and
without reasonable belief that the action or omission was in the best interests of the Corporation. 

        Except
for the foregoing change to Section C of the option agreement applicable to your Option, no other terms or conditions of your Option or the underlying option shares have
been modified as a result of the amendment, and those other terms and conditions will continue in full force and effect. Please attach a copy of this letter agreement to your stock option agreement so
that you will have a complete record of all the terms applicable to your Options. 

        The
amendment was effective as of February 16, 2001. We hope that you find this amendment a valuable addition to your equity package. Should you have any questions concerning the
amendment, please direct them to Claudia Belcher at (510) 923-2907. 

	 	 	Very truly yours,
	

 	
 	
Chiron Corporation
	

 	
 	

By:	

 
	 	 	 	

	 	 	Title:	 
	 	 	 	

3

 
 
 

EXHIBIT A    
  

	Name
 
	 	Date of Grant
	 	Exercise Price Per

Share
	 	Total Number of Option

Shares Granted
	 	Total Number of

Option Shares

Outstanding

	 	 	 	 	 	 	 	 	 
	

 	
 	

 	
 	

 	
 	

 	
 	

 

4

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Exhibit 10.506

Non-Employee Director

CHIRON CORPORATION. June 27, 2002

EXHIBIT AQuickLinks
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Ex-10.1  

ANNEX I  

 
 

Insurance Certificates    
  

	[ACORD. LOGO]	 	DATE (MM/DD/YY)

5/14/2002

 
 

CERTIFICATE OF INSURANCE    
  

	

PRODUCER

Aon Risk Services, Inc. of Southern California

707 Wilshire Boulevard, Suite 6000

Los Angeles, CA 90017

(213) 630-3200	
 	

THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
	 	 	 	 	INSURERS AFFORDING COVERAGE
	INSURED	 	INSURER A:	 	ST PAUL INS CO
	Titan Corporation	 	INSURER B:	 	ZURICH AMERICAN INS. CO.
	and all of its subsidiaries	 	INSURER C:	 	 
	3033 Science Park Road	 	INSURER D:	 	 
	San Diego, CA 92121	 	INSURER E:	 	 

COVERAGES  

THE
POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT
WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS, AND CONDITIONS OF SUCH POLICIES.
THE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. 

	CO

LTR
 
	TYPE OF INSURANCE
	POLICY

NUMBER
	 	POLICY

EFFECTIVE

DATE

(MM/DD/YY)
	 	POLICY

EXPIRATION

DATE

(MM/DD/YY)
	LIMITS
 

	A	GENERAL LIABILITY	 	 	TEO6100498	 	4/1/2002	 	6/1/2002	EACH OCCURRENCE	 	$	1,000,000
	 	ý	COMMERCIAL GENERAL LIABILITY	 	 	 	 	 	 	FIRE DAMAGE (Any One Fire)	 	$	1,000,000
	 	o	o	CLAIMS MADE	ý	OCCURRENCE	 	 	 	 	 	MED EXP (Any One Person)	 	$	10,000
	 	o	 	 	 	 	 	 	 	 	 	 	 	 	PERSONAL & ADV INJURY	 	$	1,000,000
	 	o	 	 	 	 	 	 	 	 	 	 	 	 	GENERAL AGGREGATE	 	$	2,000,000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	PRODUCTS-COMP/OP AGG	 	$	2,000,000
	 	GEN'L AGGREGATE LIMIT APPLIES PER:	 	 	 	 	 	 	 	 	 	 	 	 
	 	o	POLICY	o	PROJECT	o	LOC	 	 	 	 	 	 	 	 	 	 	 	 
	

	A	AUTOMOBILE LIABILITY	 	 	TEO6100498	 	4/1/2002	 	6/1/2002	COMBINED SINGLE LIMIT

(Ea accident)	 	$	1,000,000
	 	ý	ANY AUTO	 	Comp ACV Less Ded

$1000 Coll ACV Less Ded

$1000	 	 	 	 	 	 	 	 	 	 	 
	 	o	ALL OWNED AUTOS	 	 	 	 	 	 	BODILY INJURY

(Per person)	 	$	 
	 	o	SCHEDULED AUTOS	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	o	HIRED AUTOS	 	TEO6101544	 	4/1/2002	 	6/1/2002	BODILY INJURY

(Per accident)	 	$	 
	 	o	NON-OWNED AUTOS	 	Comp ACV Less Ded

$1000 Coll ACV Less Ded

$1000	 	 	 	 	 	 	 	 	 	 	 
	 	o	 	 	 	 	 	 	 	 	 	 	 	 	PROPERTY DAMAGE

(Per accident)	 	$	 
	 	o	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	 	GARAGE LIABILITY	 	 	 	 	 	AUTO ONLY - EA ACCIDENT	 	$	 
	 	o ANY AUTO	 	 	 	 	 	 	 	OTHER THAN	EA ACC	 	$	 
	 	o	 	 	 	 	 	 	 	 	 	 	 	 	AUTO ONLY:	AGG	 	$	 
	

	A	EXCESS LIABILITY	TEO6100498	 	4/1/2002	 	6/1/2002	EACH OCCURRENCE	 	$	40,000,000
	 	o	OCCUR	o CLAIMS MADE	 	 	 	 	 	 	AGGREGATE	 	$	40,000,000
	 	o	DEDUCTIBLE	 	 	 	 	 	 	 	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	 
	 	ý	UMBRELLA FORM	 	 	 	 	 	 	 	 	 	 	 	$	 
	

	B	WORKERS COMPENSATION

AND

EMPLOYERS LIABILITY	WC9303479-00

  

WC9303-480-00	 	4/1/2002	 	4/1/2003	ý	WC STATU-

TORY LIMITS	o	OTHER	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	E.L. EACH ACCIDENT	 	$	1,000,000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	E.L. DISEASE - EA EMPLOYEE	 	$	1,000,000
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	E.L. DISEASE - POLICY LIMIT	 	$	1,000,000
	

	

 	

OTHER	

 	

 	

 	
 	

 	
 	

 	

 	

 	

 	

 	
 	
 	

 
	

	
 	
 	

 
	

DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/RESTRICTIONS/SPECIAL ITEMS	
 	

Titan / TitanSub / 4664
	 	

The Titan Corporation and all subsidiaries. Wachovia Bank, National Association, as Administrative Agent, and each lender party to the Senior Secured Credit Agreement among the Titan Corporation, the lenders indentified therein and the Administrative
Agents are the Additional Insureds.
	

 	
 	

 

	

CERTIFICATE HOLDER

Wachovia Bank National Assoc.

As Administrative Agent

201 S. College Street, CP-23

Charlotte, NC 28288-0608

Attn: Syndication Agency Services	
 	

CANCELLATION except 10 days notice for cancellation due to non-payment of premium.

SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT.
	

 	
 	

AUTHORIZED REPRESENTATIVE
	 	 	 	 	[ILLEGIBLE]

	ACORD 25-S (7/97)	 	 	 	©ACORD CORPORATION 1988

[AON LOGO]
Insure your vision
Attachment to Certificate — additional coverages for Titan Corp. and all of its subsidiaries

	COVERAGE
 
	 	LIMITS
 
	 	DEDUCTIBLE
 
	 	CARRIER
 
	 	POLICY

NUMBER
 
	 	POLICY

PERIOD
 

	Technology Errors & Omissions	 	 	 	 	$	500,000	 	American International Surplus Lines Ins. Co.	 	279-59-31	 	4/1/2002-

4/1/2003
	 	Each Error	 	$	10,000,000	 	 	 	 	 	 	 	 	 
	 	Total Limit	 	$	10,000,000	 	 	 	 	 	 	 	 	 
	Excess Technology Errors & Omissions	 	$	10,000,000 excess of $10,000,000	 	 	 	 	Columbia Casualty Company	 	169858693	 	4/1/2002-

4/1/2003
	Excess Technology Errors & Omissions	 	$	10,000,000 excess of $20,000,000	 	 	 	 	Liberty Surplus Insurance Corp.	 	EJE-B71-078114-012	 	4/1/2002-

4/1/2003
	Excess Technology Errors & Omissions	 	$	10,000,000 excess of $30,000,000	 	 	 	 	Lloyd's	 	CQ0200005	 	4/1/2002-

4/1/2003
	Director's & Officer's Liability	 	 	 	 	 	

100,000/500,000	 	Federal Ins. Co. (Chubb)	 	8119-76-35J	 	4/3/1999-

4/3/2003
	 	Each Loss	 	$	20,000,000	 	 	SEC	 	 	 	 	 	 
	 	Each Policy Year	 	$	20,000,000	 	 	 	 	 	 	 	 	 
	Outside Directors Liability	 	 	 	 	 	None	 	Federal Ins. Co. (Chubb)	 	8119-76-35J	 	4/3/1999-

4/3/2003
	 	Each Loss	 	$	15,000,000	 	 	 	 	 	 	 	 	 
	 	Each Policy Year	 	$	15,000,000	 	 	 	 	 	 	 	 	 
	Excess Directors & Officers Liability	 	 	 	 	 	 	 	Hartford Ins. Co.	 	NDA0154823-99	 	4/3/1999-

4/3/2003
	 	Each Policy Year	 	$	20,000,000 excess of $20,000,000	 	 	 	 	 	 	 	 	 
	Excess Directors & Officers Liability	 	 	 	 	 	 	 	St. Paul Fire & Casualty	 	594CM0144	 	4/3/2000-

4/3/2003
	 	Each Policy Year	 	$	20,000,000 excess of $40,000,000	 	 	 	 	 	 	 	 	 
	Excess Directors & Officers Liability	 	 	 	 	 	 	 	Kemper Indemnity Ins. Co.	 	3DP001052	 	4/3/2000-

4/3/2003
	 	Each Policy Year	 	$	20,000,000 excess of $60,000,000	 	 	 	 	 	 	 	 	 
	Excess Directors & Officers Liability	 	 	 	 	 	 	 	National Union Fire Ins. Co.	 	873-21-91	 	5/15/2001-

4/3/2003
	 	Each Policy Year	 	$	20,000,000 excess of $80,000,000	 	 	 	 	 	 	 	 	 

[ACORD. LOGO]  

        Date (MM/DD/YY)

5/14/2002 

 
 

CERTIFICATE OF PROPERTY INSURANCE    
  

	PRODUCER

Aon Risk Services, Inc. of Southern California

707 Wilshire Boulevard, Suite 6000

Los Angeles, CA 90017

(213) 630-3200	 	MT	 	THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
	

 	
 	

 	
 	

 	
 	
COMPANIES AFFORDING COVERAGE
	

 	
 	

 	
 	

COMPANY

A	
 	

FACTORY MUTUAL INS CO.
	INSURED	 	 	 	COMPANY

B	 	 
	Titan Corporation

and all of its subsidiaries	 	 	 	COMPANY

C	 	 
	3033 Science Park Road

San Diego, CA 92121	 	 	 	COMPANY

D	 	 

COVERAGES 

THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY
REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT
TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. 

	CO

LTR
 
	 	TYPE OF INSURANCE
	 	POLICY NUMBER
	 	POLICY EFFECTIVE

DATE (MM/DD/YY)
	 	POLICY EXPIRATION

DATE (MM/DD/YY)
	 	COVERED PROPERTY
	 	LIMITS

	A	 	ý	 	PROPERTY	 	UA952	 	4/1/2002	 	4/1/2003	 	o	 	BUILDING	 	$	 
	 	 	CAUSES OF LOSS	 	 	 	 	 	 	 	o	 	PERS PROPERTY	 	$	 
	 	 	o	 	BASIC	 	 	 	 	 	 	 	o	 	BUSINESS INCOME	 	$	 
	 	 	ý	 	BROAD	 	 	 	 	 	 	 	o	 	EXTRA EXPENSE	 	$	 
	 	 	o	 	SPECIAL	 	 	 	 	 	 	 	o	 	BLANKET BUILDING	 	$	 
	 	 	o	 	EARTHQUAKE	 	 	 	 	 	 	 	o	 	BLANKET PERS PROP	 	$	 
	 	 	ý	 	FLOOD	 	 	 	 	 	 	 	ý	 	BLANKET BLDG & PP	 	$	378,840,000
	 	 	o	 	 	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	o	 	 	 	 	 	 	 	 	 	o	 	 	 	$	 
	

	 	 	o	 	INLAND MARINE	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	TYPE OF POLICY	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	CAUSES OF LOSS	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	o	 	NAMED PERILS	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	o	 	OTHER	 	 	 	 	 	 	 	o	 	 	 	$	 
	

	 	 	o	 	CRIME	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	TYPE OF POLICY	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	o	 	 	 	$	 
	

	 	 	o	 	BOILER & MACHINERY	 	 	 	 	 	 	 	o	 	 	 	$	 
	 	 	 	 	 	 	 	 	 	 	 	 	o	 	 	 	$	 
	

	 	 	o	 	OTHER	 	 	 	 	 	 	 	 	 	 	 	 	 
	

	LOCATION OF PREMISES/DESCRIPTION OF PROPERTY	 	 	 	 	 	 	 	Titan	 	 	1        1753

Named Insured: The Titan Corporation and all subsidiaries. Wachovia Bank, National Association as Administrative Agent is Loss Payee. 

SPECIAL CONDITIONS/OTHER COVERAGES 

	CERTIFICATE HOLDER

Wachovia Bank, National Association, as Administrative

Agent

201 S. College Street, CP-23

Charlotte, NC 28288-0606

Attn: Syndication Agency Services	 	CANCELLATION Except 10 days notice for non-payment

SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE ISSUING COMPANY WILL TO MAIL 30 DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT.
	

 	
 	

AUTHORIZED REPRESENTATIVE
	 	 	 	 	[ILLEGIBLE]

	ACORD 24 (1/95)	 	 	 	©ACORD CORPORATION 1995

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