15. LONG TERM INCENTIVE PLAN & STOCK OPTIONS

Long Term Incentive Plan & Stock Options

The Board of Directors adopted the Rockwell Medical, Inc., 2007 Long Term Incentive Plan ("LTIP") on April 11, 2007 as a replacement for the 1997 Stock Option Plan (the "Old Plan") which was terminated as to future grants. No options were granted under the Old Plan after 2006. There are 9,500,000 common shares reserved for issuance under the LTIP. The Compensation Committee of the Board of Directors (the "Committee") is responsible for the administration of the LTIP including the grant of stock based awards and other financial incentives including performance based incentives to employees, non-employee directors and consultants.

The Committee determines the terms and conditions of options and other equity based incentives including, but not limited to, the number of shares, the exercise price, term of option and vesting requirements. The Committee approved stock option grants and restricted stock grants during 2014, 2013 and 2012. The stock option awards were granted with an exercise price equal to the market price of the Company's stock on the date of the grant. The options expire 10 years from the date of grant or upon termination of employment and generally vest in three equal annual installments beginning on the first anniversary of the date of grant.

Restricted Stock Grants

We granted 740,000, 310,000 and 235,000 restricted shares in 2014, 2013 and 2012, respectively under the LTIP. These restricted stock grants were valued at the market price on the date of grant.

During 2014, restricted stock grants aggregating 320,000 shares were granted in January 2014 with a vesting date of approximately fourteen months after the grant date and an additional 420,000 common shares were granted in October 2014 with a vesting date of approximately seven months following the grant date. Vesting is conditioned upon continued employment with the Company.

The 2013 grant vested on the fourteenth month anniversary of the grant with vesting conditioned upon continued employment with the Company. The 2012 grant vested two years after the date of grant with vesting conditioned upon continued employment with the Company.

	2014		2013		2012
Restricted Shares Granted		740,000		310,000		235,000
Average Market Value Per Share on Grant Date	$	9.42	$	3.94	$	9.45
Expense related to All Restricted Shares	$	5,497,274	$	1,961,501	$	1,075,929
Unearned Stock Based Compensation for All Restricted Stock Awards Attributable to Future Periods.	$	2,580,634

Stock Option Grants

Our standard stock option agreement in the 2007 Plan allows for the payment of the exercise price of vested stock options either through cash remittance in exchange for newly issued shares, or through non-cash exchange of previously issued shares held by the recipient for at least six months in exchange for our newly issued shares. The 1997 Plan also allows for the retention of shares in payment of the exercise price and income tax withholding. The latter method results in no cash being received by us, but also results in a lower number of total shares being outstanding subsequently as a direct result of this exchange of shares. Shares returned to us in this manner would be retired.

In 2014, 2013 and 2012, the Company received cash proceeds of $2,964,445, $766,926 and $132,026, respectively, in exchange for shares issued upon the exercise of options during the year. No income tax benefits were recognized during 2014, 2013 and 2012 related to stock option activity as the Company has a full valuation allowance recorded against its deferred tax assets. However, tax benefits for the excess of the value of the shares issued over the price paid of $3,228,000, $609,000 and $494,000, were created in 2014, 2013, and 2012. The cumulative excess tax benefit at December 31, 2014 is $7.3 million, which when realized, will be credited directly to stockholders' equity.

A summary of the status of the LTIP and the Old Plan is as follows:

	SHARES			WEIGHTED AVERAGE EXERCISE PRICE		AGGREGATE INTRINSIC VALUE
Outstanding at December 31, 2011		5,482,135			5.23	$	17,761,008
Granted		871,000			9.62
Exercised		(223,601	)		0.59	$	1,486,470
Forfeited		(140,334	)		8.66

Outstanding at December 31, 2012		5,989,200			5.95	$	12,559,074
Granted		920,500			5.74
Exercised		(623,700	)		1.23	$	1,920,557
Forfeited		(58,000	)		8.31

Outstanding at December 31, 2013		6,228,000			6.27	$	25,956,880
Granted		1,731,500			9.43
Exercised		(1,029,016	)		2.88	$	2,964,445
Forfeited		(45,401	)		6.19

Outstanding at December 31, 2014		6,885,083			7.41	$	19,730,211

OPTIONS OUTSTANDING						OPTIONS EXERCISABLE
RANGE OF EXERCISE PRICES	NUMBER OF OPTIONS		REMAINING CONTRACTUAL LIFE	WEIGHTED EXERCISE PRICE		NUMBER OF OPTIONS		WEIGHTED AVERAGE EXERCISE PRICE
$3.09 to $4.93		1,010,916	1.1 - 8.5 yrs.	$	4.00		934,805	$	4.04
$5.34 to $7.13		2,638,000	2.8 - 8.7 yrs.	$	6.42		2,134,667	$	6.49
$8.35 to 10.20		3,236,167	4.8 - 9.8 yrs.	$	9.29		1,235,111	$	9.01

Total		6,885,083	6.3 yrs.	$	7.41		4,304,583	$	6.68


Intrinsic Value	$	19,730,211				$	15,477,857

	NUMBER OF UNVESTED OPTIONS			WEIGHTED AVERAGE FAIR MARKET VALUE AT GRANT DATE
As of December 31, 2011		1,529,333
Granted		871,000		$	5.93
Forfeited		(140,334	)
Vested		(680,999	)

As of December 31, 2012		1,579,000
Granted		920,500		$	3.33
Forfeited		(58,000	)
Vested		(727,067	)

As of December 31, 2013		1,714,433
Granted		1,731,500		$	5.91
Forfeited		(45,401	)
Vested		(820,032	)

As of December 31, 2014		2,580,500

The Company values stock options awarded using the Black-Scholes method. Assumptions used in the stock option valuations were:

	2014	2013	2012
Volatility of share price	69 - 70%	59 - 67%	64 - 65%
Risk free interest rate	1.9 - 2.0%	0.1 - 2.0%	0.8 - 1.2%
Expected option life	6 yrs.	1 - 6 yrs.	6 yrs.
Dividend Yield	0.0%	0.0%	0.0%

We believe this valuation methodology is appropriate for estimating the fair value of stock options we grant to employees and directors which are subject to ASC 718-10 requirements. We primarily base our determination of expected volatility through our assessment of the historical volatility of our common shares. We do not believe that we are able to rely on our historical stock option exercise and post-vested termination activity to provide accurate data for estimating our expected term for use in determining the fair value of these options. Therefore, as allowed by Staff Accounting Bulletin (SAB) No. 107, Share-Based Payment, we have opted to use the simplified method for estimating the expected option term equal to the midpoint between the vesting period and the contractual term. The contractual term of the option is 10 years from the date of grant and the vesting term of the option is three years from date of grant. Risk free interest rates utilized are based upon published U.S. Treasury yield curves at the date of the grant for the expected option term.

For the years ended December 31, 2014, 2013 and 2012, we recognized compensation expense of $4,597,412, $3,877,695, and $3,903,795, respectively related to options granted to employees under the LTIP with a corresponding credit to common stock. At December 31, 2014, the amount of unrecorded stock-based compensation expense for stock options attributable to future periods was approximately $9,517,328 which is expected to be amortized to expense over the remaining vesting periods of the options of 1 to 33 months.

As of December 31, 2014, the remaining number of common shares available for equity awards under the LTIP was 733,066.