TRBN Trubion Pharmaceuticals (MM)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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Trubion Pharmaceuticals, Inc.

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April 21, 2008

 

Dear Stockholder:

 

You are cordially invited to attend our Annual Meeting of Stockholders on Wednesday, May 28, 2008, at 9:30 a.m. local time, at our offices located at 2401 4th Avenue, Suite 1050, Seattle, Washington 98121. The meeting will be held on the first floor.

 

The notice of meeting and proxy statement that follow describe the business we will consider at the meeting. Your vote is very important. I urge you to vote by mail, telephone or via the Internet in order to be certain your shares are represented at the meeting, even if you plan to attend.

 

I look forward to seeing you at the meeting.

 

Peter A. Thompson, M.D., FACP

President, Chief Executive Officer
and Chairman of the Board of Directors

 

 

TRUBION PHARMACEUTICALS, INC.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On May 28, 2008

 

April 21, 2008

 

We cordially invite you to attend Trubion Pharmaceuticals, Inc.’s 2008 Annual Meeting of Stockholders, or the Annual Meeting, to be held on Wednesday, May 28, 2008 at 9:30 a.m. local time on the first floor of Trubion’s offices located at 2401 4th Avenue, Suite 1050, Seattle, Washington 98121 for the following purposes:

 

 

Stockholders of record at the close of business on March 31, 2008 will be entitled to vote at the Annual Meeting and at any adjournment or postponement of the meeting.

 

Whether or not you plan to attend the Annual Meeting, you may vote by mailing the proxy card in the enclosed postage prepaid envelope, by telephone or via the Internet in accordance with the instructions on your proxy card. Any stockholder attending the Annual Meeting may vote in person, even though such stockholder has already returned a proxy card or voted by telephone or via the Internet. Your vote is very important. We look forward to seeing you at the Annual Meeting.

 

The combined proxy statement and Annual Report and proxy are being mailed to stockholders of record on or about April 21, 2008.

 

By order of the board of directors,

 

Kathleen M. Deeley
Secretary

 

April 21, 2008

Seattle, Washington

 

 

 

 

Table of Contents

 

 

TRUBION PHARMACEUTICALS, INC.

2401 4 ^th Avenue, Suite 1050

Seattle, Washington 98121

 

 

 

 

PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS

 

 

 

 

 

All references in this proxy statement to “we,” “us,” “our,” “Trubion” or the “Company” shall mean Trubion Pharmaceuticals, Inc. This proxy statement contains important information for you to consider when deciding how to vote on the matters brought before the Annual Meeting. Please read it carefully.

 

A proxy card, the Notice of Annual Meeting of Stockholders and a copy of the 2007 Annual Report to Stockholders, or the Annual Report, are enclosed. The Annual Report can also be accessed free of charge electronically on our website at www.trubion.com or by writing to us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations.

 

This proxy statement and the enclosed Notice of Annual Meeting of Stockholders, Annual Report and proxy card are being mailed to stockholders on or about April 21, 2008.

 

Why did I receive this proxy statement?

 

The board of directors of Trubion Pharmaceuticals, or the Board, is soliciting proxies to be voted at the Annual Meeting to be held on Wednesday, May 28, 2008, and at any adjournment or postponement of the Annual Meeting. When the Company asks for your proxy we must provide you with a proxy statement that contains certain information specified by law.

 

What will the stockholders vote on at the Annual Meeting?

 

The Company’s stockholders will vote on the following two matters at the Annual Meeting:

 

 

Will there be any other items of business on the agenda?

 

We do not expect any other items of business because the deadline for stockholder proposals and nominations has already passed. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the Annual Meeting. Those persons intend to vote that proxy in accordance with their best judgment.

 

Who is entitled to vote?

 

Stockholders as of the close of business on March 31, 2008, the Record Date, may vote at the Annual Meeting. You have one vote for each share of common stock you held on the Record Date, including shares:

 

 

What constitutes a quorum?

 

A majority of the outstanding shares entitled to vote present or represented by proxy constitutes a quorum for the Annual Meeting. As of the Record Date, 17,834,226 shares of Company common stock were issued and outstanding.

 

Your shares will be counted as present at the Annual Meeting if you are either (i) present and vote in person at the Annual Meeting or (ii) have properly submitted a proxy. Abstentions, broker non-votes and votes withheld from director nominees will be considered as shares present at the Annual Meeting for the purpose of determining a quorum. A broker non-vote occurs when a broker or other nominee who holds shares for the owner of the shares

does not vote on a particular proposal because the nominee does not have discretionary voting authority for that proposal and has not received voting instructions from the owner of the shares.

 

How many votes are required for the approval of each item?

 

There are differing vote requirements for the various proposals.

 

 

How are votes counted?

 

For Proposal I you may vote “FOR” all of the nominees or you may elect to have your vote “WITHHELD” with respect to one or more of the nominees. Votes that are withheld will be excluded entirely and will have no effect in the election of directors. Similarly, if you hold your shares in a brokerage account in your broker’s name, or street name, and you do not vote or instruct your broker how to vote your shares, or your broker does not have discretionary authority to vote in the election of directors, your shares will have no effect in the election of directors.

 

For Proposal II you may vote “FOR,” “AGAINST” or “ABSTAIN.” If you abstain from voting on Proposal II, your abstention will have the same effect as a vote against the proposal. If you hold your shares in a brokerage account in your broker’s name, or street name, and you do not vote or instruct your broker how to vote your shares, or your broker does not have discretionary authority to vote on the ratification of the appointment of Ernst & Young LLP, your shares will not be counted in the tally of the number of shares cast on Proposal II and therefore may have the effect of reducing the number of shares needed to approve the proposal.

 

Finally, if you sign and return your proxy card with no further instructions, your shares will be counted as a vote “FOR” each director nominee and “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

How do I vote by proxy?

 

 

Can I change my vote?

 

You can revoke your proxy before the time of voting at the Annual Meeting in several ways:

 

 

Any stockholder owning the Company’s common stock in street name may change or revoke such stockholder’s voting instructions by contacting the bank, brokerage firm or other nominee holding the shares or by obtaining a proxy from such institution and voting in person at the Annual Meeting.

How do I vote shares that are held by my broker?

 

If you own shares held by a broker or other nominee, you may instruct your broker or other nominee to vote your shares by following instructions that the broker or nominee provides for you. Most brokers offer voting by mail, telephone, and on the Internet.

 

How do I vote in person?

 

If you are a stockholder of record as of the Record Date you may vote your shares in person at the Annual Meeting. We encourage you, however, to vote by mail, telephone or Internet even if you plan to attend the Annual Meeting.

 

Who is soliciting my vote and who pays for the solicitation of proxies?

 

This proxy statement is furnished in connection with the solicitation of your vote by the Board. We pay the costs of soliciting proxies from our stockholders. We may reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding the voting materials to the beneficial owners. Directors, officers and regular employees may solicit proxies on our behalf personally, by telephone or by facsimile without additional compensation.

 

How does the Board recommend voting on the proposals?

 

The Board recommends that you vote your shares “FOR” each of the Class II nominees to the Board and “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

How do I submit a stockholder proposal for the 2009 annual meeting?

 

We anticipate holding our 2009 Annual Meeting of Stockholders on or about May 29, 2009. Stockholder proposals for our 2009 Annual Meeting of Stockholders, whether intended for inclusion in the proxy statement for such meeting or for presentation directly at such meeting, must be received at our principal executive offices by the close of business not less than 120 calendar days before the one year anniversary of the date on which we first mailed our proxy statement to stockholders in connection with this year’s annual meeting. As such, the date after which the notice of a stockholder proposal will be considered untimely is December 26, 2008. In addition, notice of any stockholder proposals must be given in accordance with our bylaws and all other applicable requirements, including the rules and regulations of the United States Securities and Exchange Commission, or the SEC. All proposals must comply with the requirements of Rule 14a-8 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. If a stockholder fails to give notice of a stockholder proposal as required by our bylaws or other applicable requirements, then the proposal will not be included in the proxy statement for the 2009 Annual Meeting of Stockholders and the stockholder will not be permitted to present the proposal to the stockholders for a vote at the 2009 Annual Meeting of Stockholders.

 

What does it mean if I receive more than one proxy card?

 

It means that you hold shares in more than one account. To ensure that all your shares are voted, please sign and return each card, or vote each card by telephone or Internet in accordance with the instructions on each proxy card.

 

Who tabulates the votes?

 

The votes will be tabulated by an independent inspector of election, who will be a representative of our transfer agent, Mellon Investor Services LLC.

 

How do I contact the Board?

 

You can send written communications to one or more members of the Board, addressed to:

 

Corporate Secretary
Trubion Pharmaceuticals, Inc.
2401 4th Avenue, Suite 1050
Seattle, WA 98121

 

All such communications will be forwarded to the relevant director(s), except for solicitations or other matters unrelated to the Company.

What is “householding”?

 

We have adopted “householding,” a procedure under which stockholders of record who have the same address and last name and do not receive proxy materials electronically will receive only one copy of our Annual Report and proxy statement, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This procedure saves printing and postage costs by reducing duplicative mailings.

 

Stockholders who participate in householding will continue to receive separate proxy cards. Householding will not affect dividend check mailings.

 

Stockholders with shares held in street name can request information about householding from their banks, brokers, or other holders of record. Other stockholders who have the same address and last name and are not participating in householding but would like to may contact us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations.

 

What if I want to receive a separate copy of the Annual Report and proxy statement?

 

If you participate in householding and wish to receive a separate copy of the Annual Report and 2008 proxy statement, or if you wish to receive separate copies of future annual reports and proxy statements, please contact us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations. We will deliver the requested documents to you promptly upon your request.

 

Where are Trubion’s principal executive offices?

 

Our principal executive offices are located at 2401 4th Avenue, Suite 1050, Seattle, WA 98121. Our telephone number is (206) 838-0500.

 

Board of Directors

 

Director Biographies

 

Class II Directors

 

The following three directors’ terms will expire at the Annual Meeting. Each of these directors has been nominated and is standing for election to serve another term that will expire in 2011. See page 33 of this proxy statement for more information.

 

 

 

 

Class III Directors

 

The following three directors will continue in office until 2009:

 

 

 

 

Class I Directors

 

The following two directors will continue in office until 2010:

 

 

 

 

The Board has established guidelines that it follows in matters of corporate governance. The following is a summary of those guidelines. A complete copy of the guidelines is available online at http://investors.trubion.com/gpovernance.cfm or in paper form upon request to our corporate secretary.

 

Role of the Board

 

The directors are elected by the stockholders to oversee the actions and results of the Company’s management. Their responsibilities include:

 

 

Composition of the Board of Directors

 

Mix of Independent Directors and Officer-Directors

 

We believe that a substantial majority (75% or more) of the Board should be composed of independent directors and the chief executive officer should also serve as a Board member. Other officers may, from time to time, be elected to serve as Board members, but no officer other than the chief executive officer should be elected to the Board by virtue of his or her office.

 

Selection of Director Candidates

 

The Board is responsible for selecting candidates for Board membership and for establishing the criteria to be used in identifying potential candidates. The Board delegates the screening process to the nominating and corporate governance committee. For more information on the director nomination process, including the current selection criteria, please see “Nominating and Corporate Governance Committee Matters” on page 9.

 

Independence Determinations

 

The Board annually determines the independence of directors based on a review by the directors and the nominating and corporate governance committee. No director is considered independent unless the Board has determined that he or she has no material relationship with the Company, either directly or as a partner, stockholder, or officer of an organization that has a material relationship with the Company.

 

We have adopted the following standards for director independence in compliance with The NASDAQ Stock Market corporate governance listing standards:

 

 

The Board has determined that Lee R. Brettman, M.D., FACP, Steven Gillis, Ph.D., Patrick J. Heron, Anders D. Hove, M.D., David A. Mann, Samuel R. Saks, M.D., and David Schnell, M.D. meet the aforementioned independence standards. Peter A. Thompson, M.D., FACP, does not meet the aforementioned

independence standards because he is our current president and chief executive officer and is an employee of Trubion. There are no family relationships among any of our directors or executive officers.

 

Director Compensation and Equity Ownership

 

The compensation committee annually reviews director compensation. Any recommendations for changes are made to the full Board by the compensation committee.

 

In order to align directors’ incentives with stockholder value creation, we believe that directors should hold meaningful equity ownership positions in the Company; accordingly, a significant portion of overall director compensation is in the form of Company equity.

 

Board and Committee Meeting and Annual Meeting Attendance

 

Our Board held a total of eight meetings and acted by written consent two times during the calendar year ended December 31, 2007. No director attended fewer than 75% of the total number of meetings of the Board and committees of the Board of which he is a member, if any. During such period the Board had a standing audit committee, compensation committee and nominating and corporate governance committee. The Company’s audit committee charter, compensation committee charter, and nominating and corporate governance committee charter, each as adopted by the Board, are posted on our website at http://investors.trubion.com/documents.cfm under the caption “Investors — Corporate Governance — Committees and Charters.”

 

We encourage, but do not require, our Board members to attend our annual meetings of stockholders. All of our Board members attended our 2007 annual meeting.

 

Stockholders’ Communications Process

 

Any of our stockholders who wish to communicate with the Board, a committee of the Board, the non-management directors as a group, or any individual member of the Board, may send correspondence to our corporate secretary at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121.

 

Our corporate secretary will compile and submit on a periodic basis all stockholder correspondence to the entire Board, or, if and as designated in the communication, to a committee of the Board, the non-management directors as a group or an individual Board member. The independent directors of the Board review and approve the stockholders’ communications process periodically to ensure effective communication with stockholders.

 

Code of Ethics

 

The Company has adopted a Code of Business Ethics and Conduct for all employees and directors. A copy of our Code of Business Conduct and Ethics is available on our website at http://investors.trubion.com/documents.cfm.

 

We intend to post on our website at http://investors.trubion.com/documents cfm. any amendment to, or waiver from, any provision of our Code of Business Ethics and Conduct within four business days following the date of such amendment or waiver.

 

Nominating and Corporate Governance Committee Matters

 

Membership and Independence

 

Drs. Gillis, Saks and Schnell, each of whom is a non-employee member of the Board, comprise our nominating and corporate governance committee. Dr. Gillis is the chairman of our nominating and corporate governance committee. The Board has determined that each member of our nominating and corporate governance committee meets current requirements for independence under the rules and regulations of The

NASDAQ Stock Market and the SEC. The nominating and corporate governance committee is responsible for, among other things:

 

 

A more detailed description of the nominating and corporate governance committee’s functions can be found in our nominating and corporate governance committee charter at http://investors.trubion.com/documents.cfm or by writing to us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations. The nominating and corporate governance committee met two times during the fiscal year ended December 31, 2007.

 

Stockholder Recommendations and Nominees

 

The policy of our nominating and corporate governance committee is to consider properly submitted recommendations for candidates to the Board from stockholders. In evaluating such recommendations, the nominating and corporate governance committee seeks to achieve a balance of experience, knowledge, integrity, and capability on the Board and to address the membership criteria set forth under “Director Qualifications” below. Any stockholder recommendations for consideration by the nominating and corporate governance committee should include the candidate’s name, biographical information, information regarding any relationships between the candidate and Trubion within the last three years, at least three personal references, a statement of recommendation of the candidate from the stockholder, a description of the shares of Trubion beneficially owned by the stockholder, a description of all arrangements between the candidate and the recommending stockholder or any other person pursuant to which the candidate is being recommended, a written indication of the candidate’s willingness to serve on the Board and a written undertaking to provide such other information as the nominating and corporate governance committee may reasonably request.

 

Stockholder recommendations to the Board should be sent to our corporate secretary at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121.

 

In addition, our bylaws permit stockholders to nominate directors for consideration at an annual meeting. For a description of the process for nominating directors in accordance with our bylaws, see “General Information — How do I submit a stockholder proposal for the 2009 annual meeting?”

 

Director Qualifications

 

Our nominating and corporate governance committee will evaluate and recommend candidates for membership on the Board consistent with criteria established by the committee. The nominating and corporate governance committee has not formally established any specific, minimum qualifications that must be met by each candidate for the Board or specific qualities or skills that are necessary for one or more of the members of the Board to possess. The nominating and corporate governance committee, when considering a potential non-incumbent candidate, will, however, factor into its determination the following qualities of a candidate: educational background, professional experience, including whether the person is a current or former chief executive officer or chief financial officer of a public company or the head of a division of a large international organization, knowledge of our business, integrity, professional reputation, independence, wisdom and ability to represent the best interests of our stockholders.

 

Identification and Evaluation of Nominees for Directors

 

Our nominating and corporate governance committee uses a variety of methods for identifying and evaluating nominees for director. Our nominating and corporate governance committee regularly assesses the appropriate size and composition of the Board, the needs of the Board and the respective committees of the Board and the

qualifications of candidates in light of these needs. Candidates may come to the attention of the nominating and corporate governance committee through stockholders, management, current members of the Board, or search firms. The evaluation of these candidates may be based solely on information provided to the committee or may also include discussions with persons familiar with the candidate, an interview of the candidate or other actions the committee deems appropriate, including the use of third parties to review candidates.

 

Audit Committee Matters

 

Membership and Independence

 

Drs. Brettman and Saks and Mr. Mann, each of whom is a non-employee member of the Board, comprise our audit committee. Mr. Mann is the chairman of our audit committee. The Board has determined that each member of our audit committee meets current requirements for independence under the rules and regulations of the SEC and The NASDAQ Stock Market. The Board has also determined that Mr. Mann qualifies as an “audit committee financial expert” as defined in the SEC’s rules and satisfies the financial sophistication requirements of The NASDAQ Stock Market. Under the corporate governance standards of The NASDAQ Stock Market and the Exchange Act, by no later than the first anniversary of the completion of our initial public offering, each member of our audit committee was required to be an independent director pursuant to NASDAQ independence requirements and SEC audit committee independence requirements. Dr. Hove concluded his service as a member of our audit committee on September 27, 2007 in order to ensure our compliance with these requirements. Dr. Hove’s membership on the audit committee did not materially affect its ability to act independently and to satisfy any other requirements for independence. The audit committee was established in accordance with Section 3(a)(58)(A) of the Exchange Act.

 

Responsibilities

 

The audit committee is responsible for, among other things:

 

 

A more detailed description of the audit committee’s functions can be found in our audit committee charter at http://investors.trubion.com/documents.cfm or by writing to us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations. The audit committee met seven times and acted by written consent two times during the fiscal year ended December 31, 2007.

 

Audit Committee Report

 

In connection with the financial statements for the fiscal year ended December 31, 2007, the audit committee has:

 

 

 

Based on these reviews and discussions the audit committee recommended to the Board at the March 12, 2008 meeting of the Board that the Company’s audited financial statements and the assessment of internal control over financial reporting be included in the Annual Report on Form 10-K for the year ended December 31, 2007, filed with the SEC. The Board has approved this inclusion.

 

Respectfully submitted,

 

AUDIT COMMITTEE
Lee R. Brettman, M.D., FACP
David A. Mann
Samuel R. Saks, M.D.

 

Independent Auditor Fees

 

The following table sets forth the costs incurred by the Company for services provided by Ernst & Young LLP, the Company’s independent registered public accounting firm, for the years ended December 31, 2007 and December 31, 2006.

 

 

Audit Fees.   Consists of fees billed for professional services rendered in connection with the audit of our financial statements, review of the interim financial statements included in our quarterly reports and accounting services in connection with securities offerings.

 

Audit-Related Fees.   Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include consultations in connection with financial accounting and reporting standards.

 

Tax Fees.   Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance.

 

All Other Fees.   Consists of fees billed in connection with Ernst & Young LLP’s online accounting research tool.

 

Representatives of Ernst & Young LLP will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to questions from stockholders.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Public Accounting Firm

 

The audit committee’s policy is to pre-approve all services provided by the independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. The audit committee may also pre-approve particular services on a case-by-case basis. The independent registered public accounting firm is required to periodically report to the audit committee

regarding the extent of services provided by the independent registered public accounting firm in accordance with such pre-approval. The audit committee may also delegate pre-approval authority to one or more of its members. Such member(s) must report any such pre-approval to the audit committee at the next scheduled meeting. All of the services provided by Ernst & Young LLP reflected in the table of independent auditor fees were pre-approved by the audit committee.

 

Compensation Committee Matters

 

Membership and Independence

 

Dr. Gillis, Mr. Heron and Dr. Schnell, each of whom is a non-employee member of the Board, comprise our compensation committee. Mr. Heron is the chairman of our compensation committee. The Board has determined that each member of our compensation committee meets the requirements for independence under the rules of The NASDAQ Stock Market.

 

Responsibilities

 

The compensation committee is responsible for, among other things:

 

 

A more detailed description of the compensation committee’s functions can be found in our compensation committee charter at http://investors.trubion.com/documents.cfm or by writing to us at Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA 98121, Attention: Investor Relations.

 

The Committee’s Processes and Procedures

 

The compensation committee’s primary processes for establishing and overseeing executive compensation include:

 

 

Directors’ compensation is established by the Board upon the recommendation of the directors and the compensation committee.

 

Compensation Committee Interlocks and Insider Participation

 

None of Dr. Gillis, Mr. Heron or Dr. Schnell, who comprise our compensation committee, is an officer or employee of the Company. None of our executive officers currently serves, or in the past year has served, as a member of the board or compensation committee of any entity that has one or more executive officers serving on our Board or compensation committee.

2007 Director Compensation

 

The following table shows the compensation paid by Trubion to each of our directors during the fiscal year ended December 31, 2007:

 

 

 

 

Cash Compensation

 

The Company provides directors the following cash compensation:

 

 

 

Stock Compensation

 

Stock compensation for directors consists of:

 

Executive Officers

 

The following table lists our executive officers, who will serve in the capacities noted until their successors are duly appointed and qualified.

 

 

Peter A. Thompson’s biography is contained in the section of this proxy statement entitled “Board of Directors.” Dr. Thompson has served as an executive officer of Trubion since its inception.

 

Michelle G. Burris has served as our senior vice president and chief financial officer since February 2006 and additionally as treasurer since July 2007. From August 2005 to January 2006, Ms. Burris served as senior vice president and chief financial officer of Dendreon Corporation. From 1995 to 2005, Ms. Burris was an employee of Corixa Corporation, where she last served as senior vice president and chief financial officer. Ms. Burris is a member of the board of directors of Sonus Pharmaceuticals, which she joined in 2004. Ms. Burris received an MBA and Post Graduate Certificate in accounting from Seattle University and a B.S. from George Mason University. Ms. Burris has served as an executive officer of Trubion since February 2006.

 

On March 12, 2008, the Board named an additional three of Trubion’s officers as executive officers. The three newly named executive officers are:

 

Daniel J. Burge, M.D. has served as our chief medical officer since January 2006 and as a senior vice president since March 2004. From 2002 to 2003, he served as vice president of clinical research and development at Amgen. From 2000 to 2002, Dr. Burge served as vice president of clinical research and development at Immunex Corporation. Dr. Burge received an M.D. from Thomas Jefferson University and a B.A. from Taylor University.

 

Kathleen M. Deeley has served as our senior vice president, general counsel and corporate secretary since June 2007. Prior to joining Trubion, she was founder and manager of Somerset Consulting LLC, a firm providing business and legal consulting services to biotechnology and information technology companies. From 1995 until 2005, Ms. Deeley held several positions at Corixa Corporation including corporate attorney, director of legal affairs and senior vice president, general counsel and secretary. Before joining Corixa, she practiced law at Perkins Coie LLP in Seattle, Washington. Ms. Deeley graduated from the University of California, Davis and received her J.D. from the University of Washington.

Kendall M. Mohler, Ph.D is one of the Company’s co-founders and has served as our senior vice president of research and development since November 2002. From November 2002 to July 2004, he served as a member of our Board. From 2001 to 2002, Dr. Mohler served as vice president of biological sciences at Immunex Corporation. Dr. Mohler received a Ph.D. from the University of Texas Health Science Center and a B.S. from the University of Kansas.

Executive Compensation

 

Compensation Discussion and Analysis

 

Objectives and Philosophy of Executive Compensation

 

Trubion maintains a peer-based executive compensation program comprised of multiple elements. The primary objectives of the program with respect to executive compensation are:

 

 

To achieve these objectives the Company has established compensation plans that tie a substantial portion of executives’ overall compensation to key strategic financial and operational goals such as the establishment and maintenance of key strategic relationships, the development of our product candidates and the identification and advancement of additional product candidates. The compensation committee’s approach emphasizes the setting of compensation at levels the committee believes are competitive with executives in other companies of similar size and stage of development operating in the biotechnology industry while taking into account our relative performance and our own strategic goals. Overall our pay programs attempt to balance cash and equity to reward both short- and long-term performance.

 

Benchmarking of Executive Compensation

 

In furtherance of our focus on competitive compensation, we retained Radford Consulting Group in 2006 to review our policies and procedures with respect to employee compensation, including executive compensation, and the compensation committee worked with Radford Consulting Group to construct a peer group of 17 companies based on industry-appropriate peers with the following criteria:

 

 

The peer group was comprised of the following companies:

 

Based on data from Radford Consulting Group, the compensation committee conducts an annual benchmark review of our executive compensation, including the mix of elements used to compensate our executive officers. Base salaries, annual cash incentive compensation and equity compensation are benchmarked against the 50th percentile of compensation for the peer group and then confirmed against the broader biotech market data for companies with 50-149 employees. The compensation committee believes that focusing on a range around the 50th percentile for base salaries and incentive compensation provides the tools to allow a company of our size to competitively attract and retain talented officers by reflecting consideration of our stockholders’ interest in paying what is necessary, but not significantly more than necessary, to achieve Company goals, while conserving cash and equity as much as possible. The compensation committee realizes that using a benchmark at this point in our development is an essential tool but not the only means for gathering and validating market data. In instances where an executive officer is uniquely key to our success, the compensation committee may provide compensation in excess of the benchmark. Variations may also occur as a result of the experience level of the individual and market factors. The compensation committee believes that, given the competitive industry in which we operate and the company culture that we have created, our base compensation and equity programs are flexible and generally sufficient to retain our existing executive officers and to hire new executive officers when needed and required. The main objective of our compensation program is to align the strategic interests of our executive officers and stockholders. To achieve this objective we understand that we must attract and retain individuals with the appropriate expertise and leadership ability. Once we have recruited a talented executive we must motivate and reward him or her to build long-term stockholder value. Our competition for talent is significant and we recruit from a limited pool of experienced and successful resources. Our unique talent base includes executive officers who are nationally and internationally recognized for their expertise and leadership. Accordingly, our compensation program must be competitive in a challenging and dynamic labor market, while, at the same time, reinforcing our values of innovation, execution and collaboration.

 

Elements of Executive Compensation

 

We have designed and implemented compensation policies that have allowed us to recruit within and from outside the Seattle area while balancing fixed and variable pay costs for a long-term, sustainable approach to talent acquisition and retention. Our executive compensation consists of the following elements:

 

Base Salary:   We provide an annual salary based on comparable market data for level of responsibility, expertise, skills, knowledge, experience, our unique organizational requirements and desire to maintain internal equity. Although the program generally is designed to deliver executive base salaries within a range of 10% around the 50th percentile of salaries for executives with the requisite skills in similar positions with similar responsibilities at comparable companies, executives with more experience, critical skills and/or considered key performers may be compensated above the range as part of the Company’s strategy for attracting, motivating and retaining highly experienced and high performing employees. The compensation committee reviews base salaries in the fourth quarter of each year and may make adjustments from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. The primary factors in the compensation committee’s consideration of 2007 salary included anticipated increases in the labor market, maintaining internal equity among the various executive roles and the executive’s overall contribution and value to the organization.

 

Cash Incentives:   The executive officers’ annual target cash incentive compensation is determined as a percent of annual salary. This is a variable, at-risk part of annual compensation that the Board or the compensation committee may or may not award and may modify based on Company and individual performance. Each year the Board or the compensation committee establish a target annual incentive compensation pool based on a percentage of each executive’s base salary and the achievement of corporate goals and linked objectives. The percentages generally have ranged from 30% to 50% of an executive’s salary. The Board and the compensation committee have the sole authority to award annual incentive compensation to our executive officers. We utilize annual incentive compensation to compensate officers for achieving strategic and operational goals. These goals relate generally to strategic factors such

as establishment and maintenance of key strategic relationships, development of our product candidates, identification and advancement of additional product candidates and to financial factors such as raising capital, improving our results of operations and increasing the price per share of our common stock.

 

Stock Options:   We provide long-term incentives in the form of stock options. This incentive is another form of at-risk compensation. The number of options granted is discretionary and the value earned on any grant varies with the stock price over the option term. In large part due to the length of product development cycles, it is critical for our business to align the interests of executive officers and stockholders, and to retain executive officers by means of what we hope will be long-term wealth creation in the value of their stock options, which have vesting provisions that encourage continued employment while achieving interim product development milestones. We have historically elected to use stock options as the primary long-term equity incentive vehicle. Stock option grants are made at the commencement of employment, may be made annually based on performance and, occasionally, following a significant change in job responsibilities or to meet other special retention objectives. The compensation committee reviews and approves stock option awards to executive officers based on a review of competitive compensation data, its assessment of individual performance, a review of each executive’s existing long-term incentives and retention considerations. In determining the number of stock options to be granted to executives, the compensation committee also takes into account the individual’s position, scope of responsibility, ability to affect strategic business operations and stockholder value and the value of stock options in relation to other elements of the individual executive’s total compensation. We expect to continue to use stock options as a long-term incentive vehicle because:

 

 

Role of Executive Officers in Executive Compensation Decisions

 

Our compensation committee is responsible for all compensation decisions regarding our executive officers, setting salaries and determining cash incentive compensation and equity awards. The compensation committee also evaluates the performance of our chief executive officer. Our chief executive officer evaluates the performance of the other executive officers and makes recommendations regarding their compensation to the compensation committee. Except with regard to deliberations regarding his performance and compensation, our chief executive officer attends the meetings of the compensation committee where discussion and analysis of the compensation program occurs and when annual compensation is reviewed and awarded. From time to time at the request of the compensation committee, the chief financial officer and vice president of human resources provide information to the compensation committee and attend all or a portion of certain of the committee’s meetings.

 

Equity Grant Policy

 

During fiscal year 2007, our board of directors adopted written guidelines setting forth practices and procedures for all equity awards. The policy applies to awards to all employees, including executive officers, and sets forth pre-established times at which awards may be granted. Under the policy, only the compensation committee can make awards to officers and directors. The equity incentive committee, comprised of the chair of the compensation committee and the chief executive officer, can make awards to all other employees who

have not previously received equity awards, subject to prescribed limitations on the size of the award. Awards outside these limitations must be made by the compensation committee.

 

The compensation committee may make awards only at a meeting. The equity incentive committee may make awards at a meeting or by unanimous written consent. The exercise price of any award is the fair market value of our common stock on the effective date of the grant, which is the closing price of our common stock on that date.

 

All employees, including officers, and directors are eligible for annual refresh grants, which are made by the compensation committee effective on the last trading day of January.

 

The compensation committee makes awards to newly hired officers and promoted employees, including officers, at its first meeting on or after the first day of employment or the date of promotion, as the case may be. However, if an award to an executive officer would occur during a blackout period (typically the period commencing two weeks prior to the end of a fiscal quarter and ending after the second trading day following public disclosure of our results for that quarter), it will be delayed until after expiration of the blackout period. The equity incentive committee makes awards effective on the last trading day of the month in which the first day of employment occurs or the month in which the committee acts, whichever is later.

 

Stock Ownership Guidelines

 

Although stock option awards encourage equity ownership, we currently do not require our directors or executive officers to own a particular amount of our common stock. The compensation committee believes that stock and option holdings among our directors and executive officers are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders.

 

Perquisites

 

Our executive officers participate in the same group insurance and employee benefit plans as our other salaried employees. At this time we do not provide special benefits or other perquisites to our executive officers.

 

Severance and Change in Control Arrangements

 

The compensation committee views severance and change in control protections for the executive officers as a necessary component of a competitive executive compensation program. Comparative data analysis and recommendations were provided by Radford Consulting Group. Through review of this data and discussion, the Board determined that a competitive market approach would best position us to attract and retain top talent. The compensation committee further believes that change in control protections provide critical motivation for executives to continue to fulfill the Company’s objectives during and following a change in control. Based on prevalent market and peer practices, Trubion has adopted a double trigger requirement for severance payouts and acceleration of equity awards. In order to receive payments in connection with a change in control transaction, an executive’s employment must terminate.

 

On March 21, 2008, our compensation committee approved, and we entered into, employment agreements with our executive officers. Previously, Trubion had employment agreements in place with Dr. Thompson, Dr. Burge and Dr. Mohler. The employment agreements adopted in March 2008 replaced the prior employment agreements and provide as follows:

 

Thompson Agreement.   Pursuant to the terms of his employment agreement, Dr. Thompson is an at-will employee with an annual base salary of not less than $416,000. In addition, Dr. Thompson is eligible to receive annual cash incentive compensation if certain milestones, to be established by the Board or the compensation committee prior to the end of the first fiscal quarter, are achieved, and to participate in Trubion’s equity compensation plans, in each case as determined by the Board or compensation committee in its discretion. If Dr. Thompson’s employment is terminated without cause or he resigns for good reason, Dr. Thompson will be entitled to receive a lump-sum severance payment equal to 12 months of his base salary, reimbursement of COBRA premiums for up to 12 months and immediate vesting of

that number of shares of Dr. Thompson’s unvested options and other then-outstanding equity awards that would have vested if he had continued to be employed by Trubion for 12 additional months following the termination date. If such termination occurs in 2008, Dr. Thompson will receive 25 percent of his base salary in a lump-sum payment and the remaining 75 percent in twelve equal monthly installments.

 

If Dr. Thompson’s employment is terminated without cause or if he resigns for good reason, either within the period beginning three months before and ending twelve months after a change in control or if his termination is required in the merger or other agreement relating to the change in control or is pursuant to the request of the other party or parties to the transaction, Dr. Thompson will be entitled to receive a lump-sum severance payment equal to 18 months of his base salary, reimbursement of COBRA premiums for up to 18 months and immediate vesting of all unvested options and other outstanding equity awards then held by Dr. Thompson.

 

Burris Agreement.   Pursuant to the terms of her employment agreement, Ms. Burris is an at-will employee with an annual base salary of not less than $323,184. In addition, Ms. Burris is eligible to receive annual cash incentive compensation if certain milestones, to be established by the Board or the compensation committee prior to the end of the first fiscal quarter, are achieved, and to participate in Trubion’s equity compensation plans, in each case as determined by the Board or the compensation committee in its discretion. If Ms. Burris’ employment is terminated without cause or if she resigns for good reason, Ms. Burris will be entitled to receive a lump-sum severance payment equal to 12 months of her base salary, reimbursement of COBRA premiums for up to 12 months and immediate vesting of that number of shares of her unvested options and other then-outstanding equity awards that would have vested if she had continued to be employed by Trubion for 12 additional months following the termination date.

 

If Ms. Burris’ employment is terminated without cause or if she resigns for good reason, either within the period beginning three months before and ending twelve months after a change in control or if her termination is required in the merger or other agreement relating to the change in control or is pursuant to the request of the other party or parties to the transaction, Ms. Burris will be entitled to receive a lump-sum severance payment equal to 15 months of her base salary, reimbursement of COBRA premiums for up to 15 months and immediate vesting of all unvested options and other outstanding equity awards then held by Ms. Burris.

 

Burge Agreement.   Pursuant to the terms of his employment agreement, Dr. Burge is an at-will employee with an annual base salary of not less than $301,600. In addition, Dr. Burge is eligible to receive annual cash incentive compensation if certain milestones, to be established by the Board or the compensation committee prior to the end of the first fiscal quarter, are achieved, and to participate in Trubion’s equity compensation plans, in each case as determined by the Board or the compensation committee in its discretion. If Dr. Burge’s employment is terminated without cause or if he resigns for good reason, Dr. Burge will be entitled to receive a lump-sum severance payment equal to 12 months of his base salary, reimbursement of COBRA premiums for up to 12 months and immediate vesting of that number of shares of Dr. Burge’s unvested options and other then-outstanding equity awards that would have vested if he had continued to be employed by Trubion for 12 additional months following the termination date. If such termination occurs in 2008, Dr. Burge’s severance will be paid in twelve equal monthly installments.

 

If Dr. Burge’s employment is terminated without cause or if he resigns for good reason, either within the period beginning three months before and ending twelve months after a change in control or if his termination is required in the merger or other agreement relating to the change in control or is pursuant to the request of the other party or parties to the transaction, Dr. Burge will be entitled to receive a lump-sum severance payment equal to 15 months of his base salary, reimbursement of COBRA premiums for up to 15 months and immediate vesting of all unvested options and other outstanding equity awards then held by Dr. Burge.

 

Deeley Agreement.   Pursuant to the terms of her employment agreement, Ms. Deeley is an at-will employee with an annual base salary of not less than $260,151. In addition, Ms. Deeley is eligible to

receive annual cash incentive compensation if certain milestones, to be established by the Board or the compensation committee prior to the end of the first fiscal quarter, are achieved, and to participate in Trubion’s equity compensation plans, in each case as determined by the Board or the compensation committee in its discretion. If Ms. Deeley’s employment is terminated without cause or if she resigns for good reason, Ms. Deeley will be entitled to receive a lump-sum severance payment equal to 12 months of her base salary, reimbursement of COBRA premiums for up to 12 months and immediate vesting of that number of shares of her unvested options and other then-outstanding equity awards that would have vested if she had continued to be employed by Trubion for 12 additional months following the termination date.

 

If Ms. Deeley’s employment is terminated without cause or if she resigns for good reason, either within the period beginning three months before and ending twelve months after a change in control or if her termination is required in the merger or other agreement relating to the change in control or is pursuant to the request of the other party or parties to the transaction, Ms. Deeley will be entitled to receive a lump-sum severance payment equal to 15 months of her base salary, reimbursement of COBRA premiums for up to 15 months and immediate vesting of all unvested options and other outstanding equity awards then held by Ms. Deeley.

 

Mohler Agreement.   Pursuant to the terms of his employment agreement, Dr. Mohler is an at-will employee with an annual base salary of not less than $276,000. In addition, at the discretion of the compensation committee, Dr. Mohler is eligible to receive annual cash incentive compensation if certain milestones, to be established by the Board or the compensation committee prior to the end of the first fiscal quarter, are achieved, and to participate in Trubion’s equity compensation plans, in each case as determined by the Board or the compensation committee in its discretion. If Dr. Mohler’s employment is terminated without cause or if he resigns for good reason, Dr. Mohler will be entitled to receive a lump-sum severance payment equal to 12 months of his base salary, reimbursement of COBRA premiums for up to 12 months and immediate vesting of that number of shares of Dr. Mohler’s unvested options and other then-outstanding equity awards that would have vested if he had continued to be employed by Trubion for 12 additional months following the termination date. If such termination occurs in 2008, Dr. Mohler’s severance amount will be paid in twelve equal monthly installments.

 

If Dr. Mohler’s employment is terminated without cause or if he resigns for good reason, either within the period beginning three months before and ending twelve months after a change in control or if his termination is required in the merger or other agreement relating to the change in control or is pursuant to the request of the other party or parties to the transaction, Dr. Mohler will be entitled to receive a lump-sum severance payment equal to 15 months of his base salary, reimbursement of COBRA premiums for up to 15 months and immediate vesting of all unvested options and other outstanding equity awards then held by Dr. Mohler.

 

Good reason for resignation includes a material reduction or diminution of executive’s duties or responsibilities, material reduction in the executive’s base salary, material breach of the employment agreement by Trubion or a requirement by Trubion that the executive relocate more than 40 miles from our current location in Seattle. In addition to the foregoing, Dr. Thompson’s employment agreement provides that he may also terminate his employment for good reason upon a material reduction in his benefits or upon the failure of any successor of Trubion to expressly in writing assume Trubion’s obligations under Dr. Thompson’s employment agreement.

 

Under the employment agreements, events constituting cause for termination include the executive’s failure to follow the directions of the Board, conviction of a felony that materially harms the Company, acts of fraud, dishonesty or misappropriation, misconduct in the performance of the executive’s material duties or a material breach by the executive of the employment agreement.

 

The employment agreements define change in control to mean a merger with or into another corporation resulting in a change in the majority ownership of the combined voting power of the surviving entity’s securities, a sale of all or substantially all of our assets, certain changes in the majority

composition of the Board or a transaction through which any person or entity becomes the beneficial owner of securities representing 35% of the total voting power of our outstanding voting securities.

 

To obtain the severance payments and acceleration of equity awards described above, an executive would be required to execute our standard form of release of claims containing, among other things, a full release of claims. The employment agreements also include requirements that the executives not compete with Trubion or solicit its employees for one year from the date of termination. In addition, the employment agreements include repayment provisions that authorize Trubion to require an executive to reimburse Trubion for specified bonus, incentive or equity-based compensation in connection with an accounting restatement in certain circumstances.

 

In addition to the acceleration of the vesting of equity awards provided in the employment agreements, our equity incentive plans provide for acceleration in connection with change in control in certain circumstances. Our 2002 Stock Plan provides that the vesting of any unvested options or stock awards not assumed or substituted by an acquiring or successor corporation in connection with a change in control will accelerate. Our 2006 Equity Incentive Plan also provides that the vesting of any unvested options or stock awards not assumed or substituted by an acquiring or successor corporation in connection with a change in control will accelerate, unless otherwise determined by the administrator of the plan. For purposes of these plans, a change in control occurs upon the sale by Trubion of all or substantially all of its assets, a merger of Trubion with another corporation resulting in a change in ownership of Trubion or the acquisition by a person or entity of beneficial ownership of 50% or more of our outstanding voting securities. Under our 2006 Equity Incentive Plan only, certain changes in the majority composition of the Board within a two-year period are also deemed to be a change in control.

 

2007 Named Executive Officer Compensation

 

Base Salary

 

The primary factors in the compensation committee’s consideration of 2007 salary for the Company’s named executive officers included anticipated increases in the labor market, maintaining internal equity among the various executive roles and the executive’s overall contribution and value to Trubion. Trubion’s named executive officers in 2007 were Dr. Thompson and Ms. Burris.

 

Dr. Thompson, a founder of Trubion, has driven the Company’s performance, leading it from the early start-up phase through development to proof of scientific concept in humans, completing an initial public offering and sustaining an alliance with a major pharmaceutical company. In an executive session including all independent directors, the compensation committee assessed Dr. Thompson’s performance. The compensation committee considered Trubion’s and Dr. Thompson’s accomplishment of objectives that had been established at the beginning of the year and its own subjective assessment of his performance. These objectives included those described below under the caption “Cash Incentives.” The compensation committee also noted that under Dr. Thompson’s leadership, Trubion had continued progress in development of proprietary product candidates and strategic alliances. Based on these factors and a review of chief executive officer salaries among our peer group of companies and including the broader biotech group of companies of comparable size , the compensation committee set Dr. Thompson’s salary at the level that is reflected in the Summary Compensation Table below. Dr. Thompson’s base salary for 2007 equaled approximately 106% of the 50th percentile.

 

Ms. Burris is the Company’s senior vice president and chief financial officer. In establishing Ms. Burris’s base salary, the compensation committee placed particular emphasis on the experience she brought to Trubion in steering private companies through their initial public offerings and the transition to reporting company status, including developing and implementing the requisite financial and compliance systems, her leadership at Trubion in this regard, her transactional and strategic skills, her level of responsibility and her past contributions to Company performance and expected contributions to our success going forward. Based on these factors and a review of the salaries of executives in comparable positions at our peer group of companies, and including the broader biotech group of companies of comparable size, the compensation committee set Ms. Burris’ salary at the level reflected in the Summary Compensation Table. Ms. Burris’ base salary for 2007 equaled approximately 114% of the 50th percentile.

On March 12, 2008, our Board named an additional three of the Company’s officers as executive officers. These three newly named executive officers are:

 

Dr. Daniel Burge — Senior Vice President and Chief Medical Officer. Dr. Burge has developed and led the clinical development plan for the Company’s lead clinical products that include TRU-015 and TRU-016. TRU-015 is partnered as part of our collaborative venture with Wyeth Pharmaceuticals. TRU-016 is the most advanced product candidate in our proprietary pipeline. The compensation committee in setting base salary considered Dr. Burge’s instrumental role in furthering the development of clinical assets that have the greatest near term probability of success and in leading all clinical aspects of the Wyeth alliance. Dr. Burge’s base salary for 2007 equaled approximately 100% of the 50th percentile and is reflected in the Summary Compensation Table.

 

Ms. Kathleen M. Deeley — Senior Vice President and General Counsel. Ms. Deeley has responsibility for legal operations including corporate, intellectual property and compliance matters and has extensive experience in the biotechnology industry. Ms. Deeley joined the Company in June 2007. Based on these factors and a review of the salaries of executives in comparable positions at our peer group of companies, and including the broader biotech group of companies of comparable size, the compensation committee set Ms. Deeley’s salary for 2007 at the level reflected in the Summary Compensation Table. Her base salary for 2007 equaled approximately 100% of the 50th percentile and is reflected in the Summary Compensation Table.

 

Dr. Kendall M. Mohler — Senior Vice President of Research and Development. Dr. Mohler was a co-founder of the Company and oversees the Company’s research and development activities. He has the primary responsibility for ensuring the achievement and execution of scientific goals that support the Company in achieving its strategic business objectives. Based on these factors and a review of the salaries of executives in comparable positions at our peer group of companies, including the broader biotech group of companies of comparable size, the compensation committee set Dr. Mohler’s salary at the level reflected in the Summary Compensation Table. His base salary for 2007 equaled approximately 100% of the 50th percentile.

 

Cash Incentives

 

Actual cash incentives earned by each named executive officer in 2007 are listed in the Summary Compensation Table as non-equity incentive plan compensation. For the year ended December 31, 2007, target incentive compensation opportunities for executive officers ranged from 30% to 50% of their individual base salaries. The actual amount an executive officer could earn was between 50% and 100% of the target amount, subject to actual performance against the applicable performance goals, as determined by the compensation committee. No amounts would be earned if Trubion did not achieve at least 50% performance of its objectives.

 

In November 2007, the compensation committee met to review and assess the results of Company performance goals to determine the corporate performance factor at which awards were achieved under the annual cash incentive compensation program for 2007. The compensation committee determined that Trubion achieved 75% of its performance goals and awarded cash payments equal to 75% of the target amounts. Specifically, the compensation committee found that Trubion satisfied its objectives with respect to:

 

 

Trubion made significant progress in the above 2007 objectives, however, in setting incentive compensation levels, the compensation committee determined we did not fully meet all of our product development objectives.

Long-Term Incentive Awards

 

Awards of stock options are an important component of named executive officer long-term incentive pay and are granted as part of the annual performance cycle. Each of our executive officers receives stock option grants under the Company’s stock option plans. All of our full-time employees are eligible for stock option grants designed to reward persistent and committed performance over time. We believe that broad-based participation in our option program supports the alignment of employee and shareholder interests. Stock options granted to each executive officer are made on a discretionary rather than formulaic basis by the compensation committee, taking into consideration Company and individual objectives as well as retentive factors for key contributors.

 

Grants of stock options to the named executive officers are made under our Trubion 2006 Equity Incentive Plan. These grants allow the executive to acquire shares of Trubion’s common stock at a fixed price, subject to the completion of a four-year vesting period with 25% of the options vesting each year. Option grants have a ten-year term and are made at fair market value on the grant date, and, as such, will only deliver a financial value if Trubion’s stock price appreciates between the date of grant and the expiration date of the option.

 

During fiscal year 2007, we made a grant of an initial option upon hire to purchase 65,000 shares to Ms. Deeley as reflected in the 2007 Grants of Plan-Based Awards table. The size of this grant was determined based on benchmark data provided by Radford Consulting Group. The exercise price of the option was $17.53.

 

Effective January 31, 2008, the compensation committee approved equity awards to its officers and employees. These awards reflected performance in 2007 but in accordance with our established equity award granting policy, refresh grants are approved as of the last trading day of January of each year. Therefore, they are not included in the 2007 Grants of Plan-Based Awards table. Dr. Thompson received an option to purchase 90,000 shares of common stock, each of Ms. Burris and Drs. Mohler and Burge received an option to purchase 52,000 shares of common stock and Ms. Deeley received an option to purchase 20,600 shares of common stock. The exercise price of each option was $8.98. These grants were based on benchmark data provided by Radford Consulting Group and individual performance factors such as an executive’s contribution in the areas of leadership, accountability, integrity, judgment and critical analysis.

 

Compensation Committee Report

 

The compensation committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, the compensation committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement.

 

Respectfully submitted,

 

COMPENSATION COMMITTEE

Steven Gillis, Ph.D.

Patrick J. Heron

David Schnell, M.D.

 

2007 Summary Compensation Table

 

The following table shows the compensation earned by our named executive officers during the fiscal year ended December 31, 2007, and, to the degree applicable, during the fiscal year ended December 31, 2006:

 

 

 

 

2007 Grants of Plan-Based Awards

 

The following table sets forth grants of plan-based awards made to our named executive officers during the fiscal year ended December 31, 2007:

 

 

 

 

Outstanding Equity Awards at 2007 Fiscal Year-End

 

The following table sets forth, for each of the named executive officers, the number and exercise price of unexercised options, and the number and market value of stock awards that have not vested as of the end of the fiscal year ended December 31, 2007:

 

 

 

 

 

Potential Payments on Severance and Change in Control

 

The following table sets forth potential payments on termination or change in control to each named executive officer:

 

 

 

 

The applicable terms of each executive’s employment agreement and the Company’s equity incentive plans are set forth under the caption “Severance and Change in Control Arrangements” on page 19.

Transactions With Related Persons

 

Our Code of Business Conduct and Ethics requires each director, employee, officer, and contractor of Trubion to disclose any significant interest in any related-person transaction and that interest must be approved in writing by our legal department. If it is determined that the transaction is required to be reported under SEC rules, then the transaction will be subject to the review and approval of the audit committee of the Board. A copy of our Code of Business Conduct and Ethics is available on our website at http://investors.trubion.com/documents.cfm.

 

The charter of the audit committee affirms the audit committee’s responsibility for the review and approval of related-person transactions. We annually require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related-person transactions as such term is defined by SEC rules and regulations. These procedures are intended to determine whether any such related-person transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.

 

The following is a description of each transaction in the last fiscal year and each currently proposed transaction in which:

 

 

Employment Agreements

 

We are party to employment agreements with each of Dr. Thompson, Ms. Burris, Dr. Burge, Ms. Deeley and Dr. Mohler that provide for the payment of annual base salary and annual cash incentive compensation as described in the section entitled “Severance and Change in Control Arrangements” on page 19.

 

Indemnification Agreements

 

We have entered into indemnification agreements with each of our directors and officers. The form of agreement provides that we will indemnify each of our directors and officers against any and all expenses incurred by that director or officer because of his or her status as one of our directors or officers, to the fullest extent permitted by Delaware law, our amended and restated certificate of incorporation and our bylaws. In addition, the form of indemnification agreement provides that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors and officers in connection with a legal proceeding.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership on Form 3 and changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors, and 10% stockholders are also required by SEC rules to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of the copies of such forms we received, we believe that during the 2007 fiscal year all Section 16(a) filing requirements applicable to our officers, directors, and 10% stockholders were satisfied.

Voting Securities and Principal Holders

 

The following table sets forth the beneficial ownership of our common stock as of March 31, 2008 by:

 

 

 

Except as otherwise noted, and subject to applicable community property laws, the persons named in this table have, to our knowledge, sole voting and investing power for all of the shares of common stock held by them.

 

This table lists applicable percentage ownership based on 17,834,226 shares of common stock outstanding as of March 31, 2008. Options to purchase shares of our common stock that are exercisable within 60 days of March 31, 2008 are deemed to be beneficially owned by the persons holding these options for the purpose of computing the number of shares owned by, and percentage ownership of, that person, but are not treated as outstanding for the purpose of computing any other person’s number of shares owned or ownership percentage.

 

Unless otherwise indicated, the address for each stockholder on this table is c/o Trubion Pharmaceuticals, Inc., 2401 4th Avenue, Suite 1050, Seattle, WA, 98121.

 

 

 

 

 

As of the date of this proxy statement, our Board is composed of eight directors. Our Board is divided into three classes, with the term of office of one class expiring each year. We currently have eight directors with two directors in Class I and three directors in each of Class II and Class III. The terms of office of our Class II directors, David A. Mann, Samuel R. Saks, M.D. and David Schnell, M.D., will expire at the Annual Meeting. The terms of office of our Class III directors, Lee R. Brettman, M.D., Anders D. Hove, M.D., and Peter A. Thompson, M.D., FACP, will expire at the 2009 Annual Meeting of Stockholders. The terms of office of our Class I directors, Steven Gillis, Ph.D. and Patrick J. Heron will expire at the 2010 Annual Meeting of Stockholders. At the Annual Meeting, stockholders will elect three Class II directors, each for a term of three years.

 

Nominees for Class II Directors

 

The following sets forth information concerning the nominees for election as directors at the Annual Meeting, including information as to each nominee’s age and business experience as of the Record Date.

 

 

 

 

 

 

The audit committee of the Board has appointed, subject to ratification by our stockholders, Ernst & Young LLP as the Company’s independent registered public accounting firm to audit our books, records, and accounts for the current fiscal year ending December 31, 2008. Ernst & Young LLP has audited our financial statements beginning with the year ended December 31, 2003.

 

 

 

Other Matters

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

The following table sets forth as of December 31, 2007 certain information regarding our equity compensation plans.

 

Equity Compensation Plan Information

 

 

Stockholder Proposals for the 2009 Annual Meeting of Stockholders

 

Stockholder proposals for our 2009 Annual Meeting of Stockholders, whether intended for inclusion in the proxy statement for such meeting or for presentation directly at such meeting, must be received at our principal executive offices by the close of business not less than 120 calendar days before the one year anniversary of the date on which we first mailed our proxy statement to stockholders in connection with this year’s annual meeting. As such, the date after which the notice of a stockholder proposal will be considered untimely is December 26, 2008. In addition, notice of any stockholder proposals must be given in accordance with our bylaws and all other applicable requirements, including the rules and regulations of the SEC. All proposals must comply with the requirements of Rule 14a-8 under the Exchange Act. If a stockholder fails to give notice of a stockholder proposal as required by our bylaws or other applicable requirements, then the proposal will not be included in the proxy statement for the 2009 Annual Meeting of Stockholders and the stockholder will not be permitted to present the proposal to the stockholders for a vote at the 2009 Annual Meeting of Stockholders.

Other Business

 

The Board is not aware of any other matters to be presented at the Annual Meeting. If, however, any other matter should properly come before the Annual Meeting, the enclosed proxy card confers discretionary authority with respect to such matter.

 

By Order of the Board of Directors,

 

Kathleen M. Deeley

Secretary

 

PROXY

TRUBION PHARMACEUTICALS, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 28, 2008

 

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned stockholder of TRUBION PHARMACEUTICALS, INC., or Trubion, hereby nominates, constitutes and appoints Peter A. Thompson and Michelle G. Burris, and each of them (with full power to act alone) the true and lawful attorneys and proxies, each with full power of substitution, for me and in my name, place and stead, to act and vote all the common stock of Trubion standing in my name and on its books on March 31, 2008 at the Annual Meeting of Stockholders to be held at Trubion’s corporate offices at 2401 4th Avenue, Suite 1050, Seattle, Washington on May 28, 2008 at 9:30 a.m., and at any adjournment or postponement thereof, with all the powers the undersigned would possess if personally present.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS NOMINATED BY THE BOARD OF DIRECTORS. THE BOARD ALSO RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED “FOR” THE DIRECTORS SET FORTH ON THE REVERSE AND “FOR” PROPOSAL 2.

PLEASE SIGN AND DATE ON REVERSE

5 DETACH PROXY CARD HERE 5

	MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW	o
	PLEASE SEE REVERSE SIDE

Signature(s)   x				Dated:				,   2008

NOTE: Signature(s) should agree with name(s) on TRBN stock certificate(s). Executors, administrators, trustees and other fiduciaries, and persons signing on behalf of corporations or partnerships should so indicate when signing. All joint owners must sign.

5 DETACH PROXY CARD HERE 5

You Must Detach This Portion of the Proxy Card
Before Returning it in the Enclosed Envelope

Vote by Internet or Telephone or Mail

24 Hours a Day, 7 Days a Week

Internet and telephone voting is available through 11:59 PM EDT
the day prior to meeting date.

Your telephone or Internet vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.

Internet http://www.proxyvoting.com/trbn   Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.		OR		Telephone 1-866-540-5760   Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.		OR		Mail Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.

If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.

You can view the Annual Report and Proxy Statement
on the internet at: http://investors.trubion.com

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