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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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ROCKWELL MEDICAL TECHNOLOGIES, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
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SEC 1913 (02-02)
2
ROCKWELL MEDICAL TECHNOLOGIES, INC.
30142 WIXOM ROAD
WIXOM, MICHIGAN 48393
---------------------
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Rockwell Medical Technologies, Inc. (the "Company"), on Thursday, May 26, 2005
at 4:00 p.m. at the Wixom Community Center, 49015 Pontiac Trail, Wixom,
Michigan. Your Board of Directors and management look forward to greeting
personally those shareholders who are able to attend.
The meeting principally concerns two matters of particular interest to the
shareholders: the election of one Director for a three-year term expiring in
2008 and a proposal to amend the Company's 1997 Stock Option Plan to increase
the number of Common Shares with respect to which stock options may be granted
under the 1997 Stock Option Plan from 3,900,000 to 4,500,000 Common Shares in
the aggregate.
Your Board of Directors supports these proposals and believes that they are
in the best interests of the Company and of the shareholders, and your Board of
Directors recommends a vote "FOR" each such proposal. The accompanying Proxy
Statement contains additional information and should be reviewed carefully by
shareholders. A copy of the Company's Annual Report for 2004 is also enclosed.
It is important that your shares be represented and voted at the meeting,
whether or not you plan to attend. Please sign, date and mail the enclosed proxy
card at your earliest convenience.
Your continued interest and participation in the affairs of the Company are
greatly appreciated.
Sincerely,
/s/ ROBERT L. CHIOINI
Robert L. Chioini
Chairman
Wixom, Michigan
April 18, 2005
ROCKWELL MEDICAL TECHNOLOGIES, INC.
---------------------
NOTICE OF 2005 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 2005
---------------------
To the Shareholders of Rockwell Medical Technologies, Inc.:
Notice is hereby given that the 2005 Annual Meeting of Shareholders of
Rockwell Medical Technologies, Inc. (the "Company") will be held at the Wixom
Community Center, 49015 Pontiac Trail, Wixom, Michigan, on May 26, 2005, at 4:00
p.m., to consider and take action upon the following matters:
(1) the election of one Director for a term expiring in 2008;
(2) a proposal to amend the Company's 1997 Stock Option Plan to
increase the number of Common Shares with respect to which stock options
may be granted under the 1997 Stock Option Plan from 3,900,000 Common
Shares to 4,500,000 Common Shares in the aggregate; and
(3) the transaction of such other business as may properly come before
the meeting or any adjournment thereof.
Only shareholders of record on April 7, 2005, will be entitled to notice
of, and to vote at, the meeting or any adjournment of the meeting.
All shareholders are cordially invited to attend the meeting. Whether or
not you intend to be present, please complete, date, sign and return the
enclosed proxy card in the stamped and addressed envelope enclosed for your
convenience. Shareholders can help the Company avoid unnecessary expense and
delay by promptly returning the enclosed proxy card. The business of the meeting
to be acted upon by the shareholders cannot be transacted unless a majority of
the outstanding Common Shares of the Company is represented at the meeting.
A copy of the Annual Report of the Company for the fiscal year ended
December 31, 2004 accompanies this Notice.
By Order of the Board of Directors
/s/ THOMAS E. KLEMA
THOMAS E. KLEMA
Secretary
ROCKWELL MEDICAL TECHNOLOGIES, INC.
30142 WIXOM ROAD
WIXOM, MICHIGAN 48393
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PROXY STATEMENT
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ANNUAL MEETING OF SHAREHOLDERS
MAY 26, 2005
---------------------
INTRODUCTION
GENERAL
The Annual Meeting of Shareholders (the "Annual Meeting") of Rockwell
Medical Technologies, Inc. (the "Company") will be held at the Wixom Community
Center, 49015 Pontiac Trail, Wixom, Michigan on Thursday, May 26, 2005, at 4:00
p.m., Eastern Daylight Time, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. We expect that this proxy statement
and accompanying proxy will be first sent or given to shareholders on or about
April 21, 2005.
It is important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the Annual Meeting, please sign and date the
enclosed proxy and return it to us. The proxy is solicited by our Board of
Directors. Common Shares represented by valid proxies in the enclosed form will
be voted if received in time for the Annual Meeting. The expenses incurred in
connection with the solicitation of proxies will be borne by us and may include
requests by mail and personal contact by our Directors, officers and employees.
We will reimburse brokers or other nominees for their out-of-pocket expenses in
forwarding proxy materials to principals.
VOTING SECURITIES AND PRINCIPAL HOLDERS
VOTING RIGHTS AND OUTSTANDING SHARES
Only shareholders of record at the close of business on April 7, 2005 (the
"Record Date"), will be entitled to notice of, and to vote at, the Annual
Meeting or any adjournment thereof. As of the close of business on the Record
Date, we had 8,596,531 outstanding Common Shares, no par value ("Common
Shares"), the only class of stock outstanding and entitled to vote.
Each Common Share is entitled to one vote on each matter submitted for a
vote at the Annual Meeting. The presence, in person or by proxy, of the holders
of record of a majority of the outstanding Common Shares entitled to vote, or
4,298,266 Common Shares, is necessary to constitute a quorum for the transaction
of business at the Annual Meeting or any adjournment thereof.
REVOCABILITY OF PROXIES
A shareholder giving a proxy may revoke it at any time before it is voted
by giving written notice of such revocation to our Secretary or by executing and
delivering to the Secretary a later dated proxy. Attendance at the Annual
Meeting by a shareholder has given a proxy will not have the effect of revoking
it unless such shareholder gives such written notice of revocation to the
Company's Secretary before the proxy is voted. Any written notice revoking a
proxy, and any later dated proxy, should be sent to Rockwell Medical
Technologies, Inc., 30142 Wixom Road, Wixom, Michigan 48393, Attention: Thomas
E. Klema, Secretary.
Valid proxies in the enclosed form which are returned in time for the
Annual Meeting and executed and dated in accordance with the instructions on the
proxy will be voted as specified in the proxy. If no specification is made, the
proxies will be voted FOR the election as a director of the nominee listed
below, and FOR the proposed amendment to our 1997 Stock Option Plan described
below.
PRINCIPAL HOLDERS OF THE COMPANY'S VOTING SECURITIES
The following table sets forth information with respect to persons known to
us to be the beneficial owners of more than five percent of the outstanding
Common Shares:
PERCENT OF OUTSTANDING
NAME AND ADDRESS AMOUNT AND NATURE OF COMMON SHARES
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OWNED(A)
------------------- -------------------- ----------------------
Robert L. Chioini.............................. 1,565,516(b) 18.2(b)
30142 Wixom Road
Wixom, Michigan 48393
Revocable Trust of Robert S. Brown............. 713,254(c) 8.3(c)
4565 Chamberlain Drive
East China, Michigan 48054
Patricia Xirinachs............................. 630,000(d) 7.3(d)
1325 Franklin Ave., Suite 250
Garden City, New York 11530
Thomas E. Klema................................ 480,504(e) 5.6(e)
30142 Wixom Road
Wixom, Michigan 48393
Perkins Capital Management..................... 445,500(f) 5.2(f)
730 East Lake Street
Wayzata, Minnesota 55391-1769
---------------
(a) Based on 8,596,531 Common Shares outstanding as of the Record Date.
(b) Includes 961,000 Common Shares that Mr. Chioini has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
(c) This information is based upon conversations with the trustee of the
Revocable Trust of Robert S. Brown and includes 702,958 Common Shares
beneficially owned by Robert S. Brown and 10,296 Common Shares that Mr.
Brown has the right to acquire pursuant to the exercise of Common Share
Purchase Warrants.
(d) Includes 20,000 Common Shares that Mrs. Xirinachs' husband, Michael J.
Xirinachs, has the right to acquire within 60 days of the Record Date
pursuant to the Company's 1997 Stock Option Plan and 5,000 Common Shares
which he owns. This information is based on conversations between us and
Michael J. Xirinachs and information provided by our transfer agent.
(e) Includes 406,000 Common Shares that Mr. Klema has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
(f) Based on Schedule 13F filing as of December 31, 2004, and includes 20,500
Common Shares that Perkins Capital Management has the right to acquire
within 60 days of the Record Date pursuant to the exercise of Common Share
purchase warrants.
I. ELECTION OF DIRECTOR
At the Annual Meeting, one Director comprising the Class II Director is to
be elected for a three-year term expiring in 2008. It is intended that votes
will be cast pursuant to proxies received from our shareholders FOR the nominee
listed hereinafter, who is presently one of our Directors, unless contrary
instructions are received.
If for any reason the nominee becomes unavailable for election, the proxies
solicited will be voted for such nominee as is selected by management.
Management has no reason to believe that the nominee is not
2
available or will not serve if elected. The election of such Director will be
decided by a plurality of the Common Shares present and entitled to vote at the
Annual Meeting.
The following table sets forth as of the Record Date, the name, age,
position with us, principal occupation, term of service and beneficial ownership
of Common Shares with respect to the nominee for election as a Director, with
respect to each Director whose term of office as a Director will continue after
this Annual Meeting, and with respect to each of our executive officers named in
the Summary Compensation Table below.
COMMON SHARES PERCENTAGE OF
OF THE COMPANY OUTSTANDING COMMON
POSITIONS AND OFFICES WITH THE BENEFICIALLY SHARES OF THE COMPANY TERM AS
NAME AND YEAR COMPANY AND OTHER OWNED AS OF THE OWNED AS OF THE DIRECTOR TO
FIRST BECAME A DIRECTOR AGE PRINCIPAL OCCUPATIONS RECORD DATE(A) RECORD DATE(B) EXPIRE
----------------------- --- ------------------------------ --------------- --------------------- -----------
NOMINEE FOR ELECTION AS DIRECTOR
Kenneth L. Holt (2000)......... 52 Director and Co-owner of 122,500(c) 1.4% 2008
Charleston Renal Care, LLC
DIRECTORS CONTINUING IN OFFICE
Robert L. Chioini (1996)....... 40 Director, President and Chief 1,565,516(d) 18.2% 2006
Executive Officer of the
Company
Ronald D. Boyd (2000).......... 42 Director and Executive Vice 122,500(e) 1.4% 2007
President Classic Medical,
Inc.
OTHER EXECUTIVE OFFICERS
Thomas E. Klema................ 51 Vice President, Chief 480,504(f) 5.6%
Financial Officer, Treasurer
and Secretary
All directors and all executive officers as a group (4 persons)...... 2,291,020(g) 26.7%(g)
---------------
(a) All Directors and executive officers named herein have sole voting power
and sole investment power with respect to Common Shares beneficially owned,
except as otherwise noted below.
(b) Based on 8,596,531 Common Shares outstanding as of the Record Date.
(c) Includes 122,500 Common Shares that Mr. Holt has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
(d) Includes 961,000 Common Shares that Mr. Chioini has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
(e) Includes 122,500 Common Shares that Mr. Boyd has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
(f) Includes 406,000 Common Shares that Mr. Klema has the right to acquire
within 60 days of the Record Date pursuant to our 1997 Stock Option Plan.
Mr. Klema has been our Chief Financial Officer since 1999.
(g) Includes the Common Shares described in notes (c) through (f) above.
OTHER INFORMATION RELATING TO DIRECTORS
Robert L. Chioini is a founder of the Company, has served as our Chairman
of the Board since March 2000, has served as our President and Chief Executive
Officer since February 1997 and has been one of our Directors since our
formation in October 1996. From January 1996 to February 1997, Mr. Chioini
served as Director of Operations of Rockwell Medical Supplies, L.L.C., a company
which manufactured hemodialysis concentrates and distributed such concentrates
and other hemodialysis products. From January 1995 to January 1996, Mr. Chioini
served as President of Rockwell Medical, Inc., a company which manufactured
3
hemodialysis kits and distributed such kits and other hemodialysis products.
From 1993 to 1995, Mr. Chioini served as a Regional Sales Manager at Dial
Medical of Florida, Inc., currently Gambro Healthcare, Inc. (Gambro Healthcare,
Inc. is currently the second largest integrated dialysis provider, manufacturer
and distributor of renal care products in the United States).
Kenneth L. Holt was elected as one of our Directors on March 14, 2000. He
is a founder and co-owner of Charleston Renal Care, LLC, a kidney disease
management company specializing in the treatment of end-stage renal disease. He
was a founder and co-owner of Savannah Dialysis Specialists, LLC, a disease
management company specializing in the treatment of end-stage renal disease, and
served as the Managing Partner from October 1999 until its sale to Davita, Inc.
in 2004. From 1996 to October 1999, Mr. Holt served as Vice President for Gambro
Healthcare, Inc., in its Carolinas Region, and held the same position at Vivra
Renal Care, Inc., its predecessor company, which was acquired in 1997 by Gambro
Healthcare, Inc. From 1986 to 1996, Mr. Holt was also the co-owner and Managing
Partner in five dialysis clinics that he founded, which serviced approximately
350 dialysis patients.
Ronald D. Boyd was elected as one of our Directors on March 14, 2000. He is
a founder and co-owner of Classic Medical, Inc., a dialysis and medical products
company, and has served as the Executive Vice President of Classic Medical, Inc.
since its inception in November 1993. From May 1993 to November 1993, Mr. Boyd
served as a consultant for Dial Medical of Florida, Inc., a manufacturer and
distributor of dialysis products. From 1990 to 1993, Mr. Boyd served as a
Regional Sales Manager for Future Tech, Inc., a dialysis products distributor.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 2004, the Board of Directors held four
meetings and took action by written consent in lieu of a meeting once. The Board
of Directors has determined that each of Messrs. Boyd and Holt are independent
as independence is defined by the National Association of Securities Dealers'
listing standards, as those standards have been modified or supplemented.
AUDIT COMMITTEE
We have an Audit Committee which is presently comprised of Messrs. Holt and
Boyd. Each member of the Audit Committee is independent as independence for
audit committee members is defined in the National Association of Securities
Dealers' listing standards, as those standards have been modified or
supplemented. The Audit Committee:
- is directly responsible for the appointment, compensation, retention and
oversight of the work of any registered public accounting firm engaged
for the purpose of preparing or issuing an audit report or performing
other audit, review or attest services for us, including responsibility
for the resolution of disagreements between management and the auditor
regarding financial reporting; each such registered public accounting
firm must report directly to the Audit Committee;
- ensures that before the independent accountant is engaged by us to render
audit or non-audit services, the engagement is approved by the Audit
Committee or the engagement to render the service is entered into
pursuant to pre-approval policies and procedures established by the Audit
Committee; this pre-approval authority may be delegated to one or more
members of the Audit Committee;
- takes, or recommends that the full Board takes, appropriate action to
oversee the independence of our independent accountants;
- oversees our independent accountants' relationship by discussing with the
independent accountants the nature, scope and rigor of the audit process,
receiving and reviewing audit and other reports from the independent
accountants and providing our independent accountants with full access to
the Audit Committee and the Board to report on any and all appropriate
matters;
- reviews and discusses the audited financial statements and the matters
required to be discussed by SAS 61 with management and the independent
accountants, including discussions concerning the
4
independent accountants' judgments about the quality of our accounting
principles, applications and practices as applied in our financial
reporting;
- recommends to the Board whether the audited financial statements should
be included in our Annual Report on Form 10-KSB;
- reviews with management and the independent accountants the quarterly
financial information before we file our Form 10-QSBs;
- discusses with management and the independent accountants the quality and
adequacy of our internal controls;
- establishes procedures for (1) the receipt, retention and treatment of
complaints received by us regarding accounting, internal accounting
controls, or auditing matters, and (2) confidential, anonymous submission
by our employees of concerns regarding questionable accounting or
auditing matters;
- reviews related party transactions required to be disclosed in our proxy
statement for potential conflict of interest situations and approves all
such transactions;
- discusses with management the status of pending litigation as it pertains
to the financial statements and disclosure and other areas of oversight
as the Audit Committee deems appropriate; and
- reports committee activities to the full Board.
During the fiscal year ended December 31, 2004, the Audit Committee held
three meetings and had informal discussions in lieu of additional meetings. The
Board of Directors has adopted a written charter for the Audit Committee, a copy
of which is posted on our website at www.rockwellmed.com.
AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has determined that we do not have an audit
committee financial expert, as defined by the Securities and Exchange
Commission, serving on our Audit Committee. While it might be possible to
recruit a person who meets these qualifications, the Board has determined that
in order to fulfill all the functions of our Board and our Audit Committee, each
member of our Board and our Audit Committee should meet all the criteria that
have been established by our Board for Board membership, and it is not in the
best interests of our Company to nominate as a director someone who does not
have all the experience, attributes and qualifications we seek. Our Audit
Committee consists of two non-employee directors, each of whom has been selected
for the Audit Committee by the Board based on the Board's determination that
they are fully qualified to monitor the performance of management, the public
disclosures by the Company of its financial condition and performance, our
internal accounting operations and our independent auditors. In addition, the
Audit Committee has the ability on its own to retain independent accountants or
other consultants whenever it deems appropriate. Nevertheless, in order to meet
NASDAQ listing requirements, we are in the process of attempting to recruit a
person who meets the SEC definition of an audit committee financial expert.
AUDIT COMMITTEE REPORT
Our Audit Committee has:
- Reviewed and discussed our audited financial statements for the fiscal
year ended December 31, 2004 with management;
- Discussed with our independent accountants the matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
380), as it has been modified or supplemented;
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- Received the written disclosures and the letter from our independent
accountants required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), as it has been modified
or supplemented; and
- Discussed with our independent accountants the independent accountants'
independence.
Based on the review and discussions described above, the Audit Committee
recommended to our Board of Directors that the audited financial statements for
the fiscal year ended December 31, 2004 be included in our Annual Report on Form
10-KSB for the fiscal year ended December 31, 2004 for filing with the
Securities and Exchange Commission.
Management is responsible for our financial reporting process including its
system of internal control, and for the preparation of consolidated financial
statements in accordance with generally accepted accounting principles. Our
independent accountants are responsible for auditing those financial statements.
The Committee's responsibility is to monitor and review these processes. It is
not the Audit Committee's duty or responsibility to conduct auditing or
accounting reviews or procedures. The Audit Committee members are not our
employees and they may not be, and may not represent themselves to be or to
serve as, accountants or auditors by profession or experts in the field of
accounting or auditing. Therefore, the Audit Committee has relied, without
independent verification, on management's representation that the financial
statements have been prepared with integrity and objectivity and in conformity
with accounting principles generally accepted in the United States of America
and on the representations of the independent accountants included in their
report on our financial statements. The Audit Committee's oversight does not
provide them with an independent basis to determine that management has
maintained appropriate accounting and financial reporting principles or
policies, or appropriate internal controls and procedures designed to assure
compliance with accounting standards and applicable laws and regulations.
Furthermore, the Audit Committee's considerations and discussions with
management and the independent accountants do not assure that our financial
statements are presented in accordance with generally accepted accounting
principles, that the audit of our financial statements has been carried out in
accordance with generally accepted auditing standards or that our independent
accountants are in fact "independent."
By the Audit Committee
Ronald D. Boyd
Kenneth L. Holt
6
COMPENSATION COMMITTEE
Our Board of Directors does not have a standing Compensation Committee.
NOMINATING COMMITTEE
Our Board of Directors does not have a standing Nominating Committee or a
Nominating Committee Charter. The Board of Directors believes it is appropriate
not to have a standing nominating committee because we are a small business with
little turnover in our Board of Directors. We believe it provides more oversight
to have the entire Board of Directors perform the functions of a nominating
committee. The Board of Directors, a majority of the members of which are
independent as independence is defined in the National Association of Securities
Dealers' listing standards, as those standards have been modified or
supplemented, perform the function of a nominating committee. The entire Board
of Directors identifies the individuals to become board members, but the
approval of both of our independent directors is necessary to nominate directors
to be presented for shareholder approval at the annual meeting of shareholders
or to fill any vacancies. The Board of Directors has selected Kenneth L. Holt
for re-election as a director at this meeting.
The Board of Directors' policy is to consider any director candidates
recommended by shareholders. Such recommendations must be made pursuant to
timely notice in writing to our Secretary, at Rockwell Medical Technologies,
Inc., 30142 Wixom Road, Wixom, Michigan 48393. To be timely, the notice must be
received at our offices at least 120 days before the anniversary of the mailing
of our proxy statement relating to the previous annual meeting of shareholders.
The notice must set forth:
With respect to the director candidate,
- The candidate's name, age, business address and residence address,
- The candidate's principal occupation or employment,
- The number of our Common Shares beneficially owned by the candidate,
- Information with respect to the candidate's independence, as defined
under Nasdaq's listing standards for independent directors in general and
with respect to Audit Committee members,
- Information with respect to other boards on which the candidate serves,
- Information with respect to direct or indirect transactions,
relationships, arrangements and understandings between the candidate and
us and between the candidate and the shareholder giving the notice, and
- Any other information relating to the candidate that we would be required
to disclose in our proxy statement if we were to solicit proxies for the
election of the candidate as one of its directors or that is otherwise
required under Securities and Exchange Commission rules, including the
candidate's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected, and
With respect to the shareholder giving the notice,
- The name and address of the shareholder as they appear on our stock
transfer records, and
- The number of our Common Shares beneficially owned by the shareholder
(and the period they have been held).
The Board of Directors has not established specific, minimum qualifications
for recommended nominees or specific qualities or skills for one or more of our
directors to possess. The Board of Directors uses a subjective process for
identifying and evaluating nominees for director, based on the information
available to, and the subjective judgments of, the members of the Board of
Directors and our then current needs, although the Board does not believe there
would be any difference in the manner in which it evaluates nominees based on
whether the nominee is recommended by a shareholder. Historically, nominees have
been existing directors or business associates of our Directors or officers.
7
CODE OF BUSINESS CONDUCT AND ETHICS
Our Board of Directors adopted a Code of Business Conduct and Ethics on
April 15, 2004, that applies to all of our employees, officers and Directors,
including our principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions. Our Code of Business Conduct and Ethics contains written standards
that we believe are reasonably designed to deter wrongdoing and to promote:
- Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships,
- Full, fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the Securities and Exchange
Commission and in other public communications we make,
- Compliance with applicable governmental laws, rules and regulations,
- The prompt internal reporting of violations of the Code of Business
Conduct and Ethics to the appropriate person or persons, and
- Accountability for adherence to the Code of Business Conduct and Ethics.
Our Code of Business Conduct and Ethics is posted on our website at
www.rockwellmed.com. We will provide to any person without charge, upon request,
a copy of our Code of Business Conduct and Ethics. Requests for a copy should be
made to our Secretary at Rockwell Medical Technologies, Inc., 30142 Wixom Road,
Wixom, Michigan 48393. We intend to satisfy the disclosure requirement under
Item 5.05 of Form 8-K regarding any amendments to, or a waiver from, a provision
of the Code of Business Conduct and Ethics that applies to our principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions and that relates to any
element of the code of ethics definition enumerated in Securities and Exchange
Commission, Regulation S-B, Item 406(b) by posting such information on our
website at www.rockwellmed.com within four business days following the date of
the amendment or waiver.
SHAREHOLDER COMMUNICATIONS WITH THE BOARD
The Board of Directors has a process for shareholders to send
communications to our Board of Directors or Audit Committee, including
complaints regarding accounting, internal accounting controls or auditing
matters. Communications can be sent to our Board of Directors, our Audit
Committee or specific Directors either by regular mail to the attention of our
Board of Directors, our Audit Committee or specific Directors, at our principal
executive offices at 30142 Wixom Road, Wixom, Michigan 48393. All of these
communications will be initially reviewed by our Secretary (1) to filter out
communications that the Secretary deems are not appropriate for the Directors,
such as communications offering to buy or sell products or services, and (2) to
sort and relay the remainder (unedited) to the appropriate Directors.
We encourage all of our Directors to attend the annual meeting of
shareholders, if possible. One of our continuing Directors attended the 2004
annual meeting of shareholders.
8
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
SUMMARY COMPENSATION TABLE
The following table sets forth, for the years ended December 31, 2002, 2003
and 2004, the compensation awarded to, earned by or paid to Mr. Robert L.
Chioini, the Company's Chief Executive Officer, and Thomas E. Klema, our only
other executive officer whose total annual salary and bonus exceeded $100,000
for the year ended December 31, 2004. During the years ended December 31, 2002,
2003 and 2004, no other officers earned in excess of $100,000 in total annual
salary and bonus.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
----------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#)
--------------------------- ---- -------- ----- ------------ ------------
Robert L. Chioini..................... 2004 $275,000(1) -0- $19,416(2) 500,000
President and Chief 2003 $275,000(1) -0- $18,988(2) 325,000
Executive Officer 2002 $275,000(1) -0- $16,194(2) 173,000
Thomas E. Klema....................... 2004 $156,600 -0- $10,788(2) 200,000
Vice President and 2003 $156,600 -0- $11,388(2) 175,000
Chief Financial Officer 2002 $156,600 -0- $ 9,416(2) 113,000
---------------
(1) On March 20, 2000, we entered into a three year employment agreement with
Mr. Chioini pursuant to which Mr. Chioini was paid an annual salary of
$275,000. The employment agreement expired on March 20, 2003. The employment
agreement called for salary increases of $25,000 in each succeeding year of
the agreement. However, these increases were not put into effect.
(2) Other annual compensation includes executive perquisites for health, life
and dental insurance and our car allowance program.
OPTION GRANTS AND RELATED INFORMATION
The following table sets forth information concerning stock option grants
during the fiscal year ended December 31, 2004 by the executive officers named
in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
% OF TOTAL OPTIONS
NUMBER OF SECURITIES GRANTED TO EXERCISE OR
UNDERLYING OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE
---- -------------------- ------------------ ----------- ----------
Robert L. Chioini.................. 165,000(1) 20.9% 4.05 1/13/2014
335,000(2) 42.5% 2.79 12/22/2014
Thomas E. Klema.................... 85,000(1) 10.8% 4.05 1/13/2014
115,000(2) 14.6% 2.79 12/22/2014
---------------
(1) These options were granted on January 13, 2004. 25% of the options granted
were immediately exercisable and the balance of the options become
exercisable at the rate of 25% of the total grant per year on each of the
next three anniversaries of the date of grant.
(2) These options were granted on December 22, 2004. 25% of the options granted
were immediately exercisable and the balance of the options become
exercisable at the rate of 25% of the total grant per year on each of the
next three anniversaries of the date of grant.
9
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning exercises of stock
options during the fiscal year ended December 31, 2004 by the executive officers
named in the Summary Compensation Table above and the value of unexercised
options held by such persons as of December 31, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR END FISCAL YEAR END
NAME EXERCISE(#) REALIZED($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)($)
---- -------------- ----------- --------------------------- ------------------------------
Robert L. Chioini.... -0- 0 919,750/573,250 1,272,295/385,525
Thomas E. Klema...... -0- 0 384,750/258,250 609,995/186,625
COMPENSATION OF DIRECTORS
In July 1997, our Board of Directors and shareholders adopted the Rockwell
Medical Technologies, Inc. 1997 Stock Option Plan (the "1997 Stock Option
Plan"). The 1997 Stock Option Plan permits the Board of Directors, among other
things, to grant options to purchase Common Shares to our Directors, including
our Directors who are not our officers or employees (collectively, "Outside
Directors"). Upon the election of any new member to the Board of Directors who
is an Outside Director or at any other time that the Board deems reasonable, in
the Board's discretion, may grant to such member an option to purchase 5,000
Common Shares or such other amounts as are reasonable, in the Board's
discretion, at a per share exercise price equal to the fair market value of a
Common Share at the date of grant. On each date on which an annual meeting of
our shareholders is held, provided that a sufficient number of Common Shares
remain available under the 1997 Stock Option Plan, the Board of Directors, in
its discretion, may grant to each Outside Director who is then serving on the
Board of Directors an option to purchase Common Shares. The exercise price of
such options will be the fair market value of the Common Shares on the date of
grant. The options granted to the Outside Directors will generally become fully
exercisable on the first anniversary of the date of grant. Such options will
expire ten years after the date of grant. If an Outside Director becomes our
officer or employee and continues to serve as a member of the Board of
Directors, options granted under the 1997 Stock Option Plan will remain
exercisable in full. On January 13, 2004, options to purchase 10,000 Common
Shares were granted to each Outside Director at an exercise price of $4.05. On
December 22, 2004, options to purchase 25,000 Common Shares were granted to each
Outside Director at an exercise price of $2.79.
II. PROPOSAL TO APPROVE AMENDMENT TO THE
ROCKWELL MEDICAL TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
GENERAL
We seek to amend the 1997 Stock Option Plan to increase the number of
shares subject to the 1997 Stock Option Plan. You are being asked to consider
and approve an amendment to the 1997 Stock Option Plan to increase the number of
Common Shares reserved for issuance upon the exercise of options granted under
the 1997 Stock Option Plan by 600,000. Pursuant to the 1997 Stock Option Plan,
3,900,000 Common Shares are currently reserved for issuance upon the exercise of
options granted or to be granted to participants under the 1997 Stock Option
Plan. Our key employees, officers, Directors, consultants and advisors and those
of any entity in which we have a direct or indirect ownership interest of 50% or
more of the total combined voting power of all classes of outstanding voting
equity interests are eligible to participate in the 1997 Stock Option Plan. Our
Board of Directors or a committee appointed by our Board of Directors determines
which persons eligible to participate in the 1997 Stock Option Plan are actually
granted options under the 1997 Stock Option Plan.
10
The Board of Directors believes that it is in our best interests and in the
best interests of our shareholders to approve the proposed amendment to the 1997
Stock Option Plan to allow us to continue to grant options in accordance with
the 1997 Stock Option Plan.
The purpose of the 1997 Stock Option Plan is to provide our key employees,
officers, Directors, consultants and advisors with an increased incentive to
make significant and extraordinary contributions to our long-term performance
and growth, to join the interests of our key employees, officers, Directors,
consultants and advisors with the interests of our shareholders and to help us
attract and retain our key employees, officers, Directors, consultants and
advisors. The 1997 Stock Option Plan, however, could have an "anti-takeover"
effect, particularly with regard to the Committee's (as defined below) ability
to accelerate the exercisability of stock options in connection with a change in
control.
Options granted under the 1997 Stock Option Plan may be incentive stock
options or nonqualified options. The Board of Directors adopted the 1997 Stock
Option Plan on July 15, 1997, amended the 1997 Stock Option Plan on May 10, 1999
to increase the number of shares reserved for issuance under the 1997 Stock
Option Plan, amended the 1997 Stock Option Plan on June 4, 2001 to increase the
number of shares reserved for issuance under the 1997 Stock Option Plan, amended
the 1997 Stock Option Plan on April 1, 2003 to increase the number of shares
reserved for issuance under the 1997 Stock Option Plan, amended the 1997 Stock
Option Plan on March 31, 2004 to increase the number of shares reserved for
issuance under the 1997 Stock Option Plan and to increase the maximum number of
shares that may be granted under the 1997 Stock Option Plan to a participant,
and approved the currently proposed amendment on March 21, 2005.
As of April 7, 2005, (1) options to purchase 2,677,717 Common Shares were
outstanding under the 1997 Stock Option Plan, (2) options to purchase 778,928
Common Shares granted under the 1997 Stock Option Plan had been exercised, and
(3) 443,355 Common Shares remained available for the grant of options under the
1997 Stock Option Plan. The proposed amendment to the 1997 Stock Option Plan
would increase the number of Common Shares reserved for issuance upon the
exercise of options granted or to be granted under the 1997 Stock Option Plan by
600,000 Common Shares.
Our Board of Directors, in its discretion, may grant Outside Directors who
continue to serve as our Directors after each annual meeting of shareholders,
ten-year options to purchase Common Shares each year on the date of the annual
meeting of shareholders, or at a time determined reasonable by the Board of
Directors, exercisable at the fair market value of the Common Shares on the date
of grant, all under the amended 1997 Stock Option Plan.
Persons deemed to be our affiliates, i.e., persons who directly or
indirectly through one or more intermediaries, control, are controlled by, or
are under common control with, us, must resell securities acquired under the
1997 Stock Option Plan pursuant to a registration statement under the Securities
Act of 1933 and the related rules and regulations, Rule 144 under the Securities
Act or an applicable exemption under the Securities Act.
We are the issuer of the securities offered pursuant to the 1997 Stock
Option Plan. The Common Shares we issue upon exercise of stock options under the
1997 Stock Option Plan may be either our authorized and unissued or reacquired
Common Shares. The 1997 Stock Option Plan is not subject to any provisions of
the Employee Retirement Income Security Act of 1974 and is not qualified under
Section 401(a) of the Code.
ADMINISTRATION
The 1997 Stock Option Plan is administered by a committee or entity
appointed by our Board of Directors to perform any of the functions and duties
of such committee under the 1997 Stock Option Plan and, with respect to
administration of the 1997 Stock Option Plan regarding participants who are
subject to Section 16(a) and (b) of the Securities Exchange Act of 1934 and the
related rules and regulations, that is a committee meeting the standards of Rule
16b-3 under the Exchange Act, or any similar successor rule, or the Board of
Directors as a whole. The administrator is referred to in the 1997 Stock Option
Plan as the "Committee." Members of the Committee serve at the pleasure of the
Board of Directors and may be
11
removed or replaced by the Board of Directors at any time. The Committee
currently consists of the Board of Directors as a whole.
Subject to the provisions of the 1997 Stock Option Plan, the Committee is
authorized to interpret the 1997 Stock Option Plan, to make, amend and rescind
rules relating to the 1997 Stock Option Plan, and to make all other
determinations necessary or advisable for the 1997 Stock Option Plan's
administration. The Committee's interpretation of any provision of the 1997
Stock Option Plan is, unless otherwise determined by our Board of Directors,
final and conclusive. Subject to the provisions of the 1997 Stock Option Plan,
the Committee determines, from those eligible to be participants under the 1997
Stock Option Plan, the persons to be granted stock options, the amount of stock
to be optioned to each such person, the time such options shall be granted, the
time or times such options shall be exercisable and the terms and conditions of
any stock options. Such terms and conditions may, in the Committee's sole
discretion include, without limitation, provisions providing for termination of
the option, forfeiture of the gain on any option exercises or both if the
participant competes with us or otherwise acts contrary to our interests, and
provisions imposing restrictions, potential forfeiture or both on shares
acquired upon exercise of options granted pursuant to the 1997 Stock Option
Plan. The Committee may condition any grant on the potential participant's
agreement to such terms and conditions. Under the 1997 Stock Option Plan, in
exercising its discretion, there is no requirement whatsoever that the Committee
follow past practices, act in a manner consistent with past practices, or treat
any key employee, officer, director, consultant or advisor in a manner
consistent with the treatment afforded other key employees, officers, directors,
consultants or advisors with respect to the 1997 Stock Option Plan or otherwise.
Subject to the requirements of the Internal Revenue Code with respect to
incentive stock options that are intended to remain incentive stock options,
when a participant ceases to be one of our employees for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its discretion, in whole or in part, the time or installments
with respect to which the stock option shall be exercisable, subject to any
restrictions, terms and conditions fixed by the Committee. The Committee may
exercise its discretion at the date of the grant of the stock option or after
the date of grant.
In addition to any other rights of indemnification they may have, we will
indemnify the members of the Committee in connection with any claim, action,
suit or proceeding relating to any action taken or failure to act under or in
connection with the 1997 Stock Option Plan or any option granted under the 1997
Stock Option Plan to the full extent provided for under our Articles of
Incorporation or bylaws with respect to indemnification of our Directors.
1997 STOCK OPTION PLAN PARTICIPANTS
The Committee, in its discretion, selects the persons who are eligible to
participate in the 1997 Stock Option Plan and determines the grants and awards
to those individuals. The only limitation on eligibility under the 1997 Stock
Option Plan is that individuals must be one of our key employees, officers,
Directors, consultants or advisors, as determined by the Committee in its
discretion; provided that incentive stock options may be granted only to our
employees, as defined in the Internal Revenue Code, to the extent required by
Section 422 of the Internal Revenue Code.
Approximately 50 key employees and three Directors are currently eligible
to participate in the 1997 Stock Option Plan, of which 50 key employees and all
of the Directors have been granted options under the 1997 Stock Option Plan.
Currently, no participant may be granted stock options to purchase more
than 500,000 Common Shares in the aggregate in any fiscal year. In addition,
grants and awards are subject to the maximum number of shares remaining
available for the grant of stock options under the 1997 Stock Option Plan. There
are also limitations on the maximum value of incentive stock options that may
become first exercisable by any person in any year. Each option grant under the
1997 Stock Option Plan must be evidenced by a written agreement containing
provisions approved by the Committee.
12
SHARES SUBJECT TO GRANT OR AWARD
The maximum number of Common Shares reserved for issuance upon the exercise
of stock options granted under the 1997 Stock Option Plan is currently 3,900,000
Common Shares and is proposed to be amended to be 4,500,000 Common Shares. These
Common Shares may consist in whole or in part of authorized and unissued or
reacquired Common Shares. Unless the 1997 Stock Option Plan has terminated,
shares covered by the unexercised portion of canceled, expired or otherwise
terminated options under the 1997 Stock Option Plan are again available for
option and sale.
The number and type of shares subject to each outstanding stock option, the
option price with respect to outstanding stock options, the aggregate number and
type of shares remaining available under the 1997 Stock Option Plan, and the
maximum number and type of shares that may be granted to any participant in any
fiscal year are subject to such adjustment as the Committee, in its discretion,
deems appropriate to reflect events such as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by the Company; provided that no fractional shares may be issued pursuant to the
1997 Stock Option Plan, no rights may be granted under the 1997 Stock Option
Plan with respect to fractional shares, and any fractional shares resulting from
such adjustments shall be eliminated from any outstanding option.
AMENDMENT OR TERMINATION OF THE 1997 STOCK OPTION PLAN
Our Board of Directors may terminate or amend the 1997 Stock Option Plan,
or amend any stock option agreement under the 1997 Stock Option Plan, at any
time; provided that,
- to the extent required by Section 162(m) of the Internal Revenue Code and
related regulations, or any successor rule, but only with respect to
amendments or revisions affecting participants whose compensation is
subject to Section 162(m) of the Internal Revenue Code, and to the extent
required by Section 422 of the Code, or any successor section, but only
with respect to incentive stock options, no such amendment or revision
may increase the maximum number of shares in the aggregate that are
subject to the 1997 Stock Option Plan without our shareholders' approval
or ratification, and
- no such amendment or revision may change the option price or alter or
impair any stock option previously granted under the 1997 Stock Option
Plan, in a manner adverse to a participant, without the consent of that
participant,
all except as described above under the caption "Shares Subject to Grant or
Award."
Unless sooner terminated by our Board of Directors, the 1997 Stock Option
Plan will terminate on July 15, 2007, which is ten years after its original
adoption by our Board of Directors. No stock options may be granted under the
1997 Stock Option Plan after that date. Termination of the 1997 Stock Option
Plan will not affect the validity of any option outstanding on the date of
termination.
STOCK OPTIONS
GRANT OF STOCK OPTIONS
Both incentive stock options and nonqualified options may be granted under
the 1997 Stock Option Plan. An incentive stock option is intended to be an
incentive stock option and qualifies as incentive stock options under Section
422 of the Internal Revenue Code. Any incentive stock option granted under the
1997 Stock Option Plan must have an exercise price that is not less than 100% of
the fair market value of the shares on the date on which the option is granted.
For an incentive stock option granted to a participant who owns more than 10% of
our total combined voting shares, the exercise price must not be less than 110%
of the fair market value of the shares subject to that option on the date the
option is granted. A nonqualified option granted under the 1997 Stock Option
Plan must have an exercise price that is not less than the par value, if any, of
the Common Shares.
13
At the time any option granted under the 1997 Stock Option Plan is
exercised, the participant must pay the full option price for all shares
purchased:
- in cash, or
- with the consent of the Committee, in its discretion,
- by a promissory note, in a form acceptable to the Committee, payable to
the order of us,
- by a cash down payment and a promissory note for the unpaid balance,
- subject to any conditions established by the Committee, by having us
retain from the shares to be delivered upon exercise of the stock option
that number of shares having a fair market value on the date of exercise
equal to the option price,
- by delivery to us of written notice of the exercise, in such form as the
Committee may prescribe, accompanied by irrevocable instructions to a
stock broker to promptly deliver to us full payment for the shares with
respect to which the option is exercised from the proceeds of the stock
broker's sale of the shares or loan against them, or
- in such other manner as the Committee determines is appropriate, in its
discretion.
The aggregate fair market value, determined as of the date the option is
granted, of the underlying stock with respect to which incentive stock options
are exercisable for the first time by an individual during any calendar year
under all of our plans cannot exceed $100,000.
TERM OF STOCK OPTIONS
If not sooner terminated, each stock option granted under the 1997 Stock
Option Plan will expire not more than ten years from the date of grant; provided
that, with respect to an incentive stock option granted to a participant who, at
the time of the grant, owns more than 10% of our total combined voting stock,
the option must expire not more than five years after the date of the grant.
CONTINUATION OF EMPLOYMENT
Options granted under the 1997 Stock Option Plan may be exercised only
while the participant is one of our employees, officers, Directors, consultants
or advisors, except as described under the caption "Extraordinary Transactions"
and except that the Committee may, in its discretion, permit the exercise of all
or any portion of the options granted to a participant:
- for a period not to exceed three months following such termination with
respect to incentive stock options that are intended to remain incentive
stock options if such termination is not due to death or permanent
disability of the participant,
- for a period not to exceed one year following termination of employment
with respect to incentive stock options that are intended to remain
incentive stock options if termination of employment is due to the death
or permanent disability of the participant, and
- for a period not to extend beyond the expiration date with respect to
nonqualified options or incentive stock options that are not intended to
remain incentive stock options,
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises its discretion.
In no event, however, is an option exercisable after its expiration date,
and, unless the Committee in its discretion determines otherwise pursuant to the
1997 Stock Option Plan, an option may only be exercised after termination of a
participant's employment, consultation or other service to the extent
exercisable on the date of such termination or to the extent exercisable as a
result of the reason for such termination. The Committee may evidence the
exercise of its discretion in any manner it deems appropriate, including by
resolution, by a provision in the option, or by an amendment to the option.
14
Subject to the requirements of the Internal Revenue Code with respect to
incentive stock options that are intended to remain incentive stock options,
when a participant ceases to be one of our employees for any reason, the stock
option agreement may provide for the acceleration of, or the Committee may
accelerate, in its discretion, in whole or in part, the time or installments
with respect to which the stock option shall be exercisable, subject to any
restrictions, terms and conditions fixed by the Committee. The Committee may
exercise its discretion at the date of the grant of the stock option or after
the date of grant.
The Committee may require any participant to agree, as a condition to the
grant of an option, to remain in his or her position as one of our employees,
officers, Directors, consultants or advisors for a minimum period from the date
the stock option is granted that is fixed by the Committee. Nothing in the 1997
Stock Option Plan or in any option granted under the 1997 Stock Option Plan, nor
any action taken by the Committee under the 1997 Stock Option Plan gives any
participant any right with respect to continuation of employment, consultation
or other service with us or interfere in any way with our right to terminate
such person's employment, consultation or other service at any time.
SEQUENTIAL EXERCISE
We may grant additional stock options to the same participant even if
options previously granted to that participant remain unexercised. A participant
may exercise any option granted under the 1997 Stock Option Plan, if then
exercisable, even if options previously granted to that participant remain
unexercised.
TRANSFERABILITY OF OPTIONS
Except as otherwise described below, if required by Section 422 of the
Internal Revenue Code, but only with respect to incentive stock options, or to
the extent determined by the Committee in its discretion, (1) no option granted
under the 1997 Stock Option Plan is transferable by the participant other than
by will, or by the laws of descent and distribution or, for nonqualified options
only (unless permitted by Section 422 of the Internal Revenue Code), pursuant to
a qualified domestic relations order as defined in the Internal Revenue Code or
Title I of the Employee Retirement Income Security Act, or the rules thereunder,
and (2) each option is exercisable, during the lifetime of the participant, only
by the participant.
The Committee may, in its discretion, grant options on terms that permit
the optionee to transfer all or a portion of the options to the following
persons, and that permit the following persons to exercise the options
transferred to them:
- the optionee's spouse, children or grandchildren of the optionee, who are
referred to in the 1997 Stock Option Plan as "Immediate Family Members,"
- a trust or trusts for the exclusive benefit of Immediate Family Members,
- a partnership in which Immediate Family Members are the only partners, or
- such other persons or entities as determined by the Committee, in its
discretion.
Any rights to transfer options are on such terms and conditions as the
Committee, in its discretion, may determine; provided that (1) the stock option
agreement pursuant to which such options are granted must be approved by the
Committee and must expressly provide for transferability in a manner consistent
with these provisions of the 1997 Stock Option Plan, and (2) subsequent
transfers of transferred options are prohibited except for transfers the
original optionee would be permitted to make (if he or she were still the owner
of the option) in accordance with the 1997 Stock Option Plan.
Following transfer, the options continue to be subject to the same terms
and conditions as were applicable immediately before transfer; provided that for
some purposes under the 1997 Stock Option Plan (generally relating to exercise
of the option) the term "Participant" is deemed to refer to the transferee. The
events of termination of employment, described above under the caption
"Continuation of Employment," continue to be applied to the original optionee.
Following such events of termination of employment of the original optionee, the
options are exercisable by the transferee only to the extent, and for the
periods, described above under the caption "Continuation of Employment." The
original optionee remains subject to withholding taxes
15
and related requirements upon exercise described below under the caption
"Federal Income Tax Consequences -- Withholding Payments." We have no obligation
to provide any notice to any transferee, including notice of any termination of
the option as a result of termination of the original optionee's employment or
other service.
SHAREHOLDER RIGHTS
No participant in the 1997 Stock Option Plan has any of the rights of our
shareholders under any option granted under the 1997 Stock Option Plan until the
actual issuance of shares to the participant. Before such issuance no adjustment
will be made for dividends, distributions or other rights in respect of such
shares, except as described under the caption "Shares Subject to Grant."
EXTRAORDINARY TRANSACTIONS
Under the 1997 Stock Option Plan, specified consolidations, mergers,
transfers of substantially all of our properties and assets, dissolutions,
liquidations, reorganizations or reclassifications effected in such a way that
holders of Common Shares are entitled to receive stock, securities, cash or
other assets with respect to, or in exchange for, their Common Shares, are each
referred to as a "Transaction." If we engage in a Transaction, then each
participant exercising a 1997 Stock Option Plan stock option after consummation
of the Transaction will be entitled to receive (for the same aggregate exercise
price) the stock and other securities, cash and assets the participant would
have received in the Transaction if he or she had exercised the option in full
immediately before consummation of the Transaction.
In addition, in connection with a Transaction, the Committee, acting in its
discretion without the consent of any participant and regardless of any other
provision of the 1997 Stock Option Plan, may:
- permit stock options outstanding under the 1997 Stock Option Plan to be
exercised in full for a limited period of time, after which all
unexercised stock options and all rights of participants under such
options would terminate,
- permit stock options outstanding under the 1997 Stock Option Plan to be
exercised in full for their then remaining terms, or
- require all stock options outstanding under the 1997 Stock Option Plan to
be surrendered to us for cancellation and payment to each participant in
cash of the excess of the fair market value of the underlying Common
Shares as of the date the Transaction is effective over the exercise
price, less any applicable withholding taxes.
The 1997 Stock Option Plan provides, however, that the Committee may not select
an alternative for a participant that would result in his or her liability under
Section 16(b) of the Exchange Act, without the participant's consent. If all of
the alternatives have such a result, the Committee will take action to put the
participant in as close to the same position as he or she would have been in if
one of the alternatives described above had been selected, but without resulting
in any payment by the participant under Section 16(b) of the Exchange Act. With
the consent of each affected participant, the Committee may make such provision
with respect to any Transaction as it deems appropriate.
FEDERAL INCOME TAX CONSEQUENCES
The rules governing the tax treatment of options and shares acquired upon
the exercise of options are quite technical. Therefore, the description of
federal income tax consequences set forth below is necessarily general in nature
and does not purport to be complete. Moreover, statutory provisions are subject
to change, as are their interpretations, and their application may vary in
individual circumstances. Finally, the tax consequences under applicable state
and local income tax laws may not be the same as under the federal income tax
laws.
16
INCENTIVE STOCK OPTIONS
Incentive stock options granted under the 1997 Stock Option Plan are
intended to qualify as "Incentive Stock Options" under Section 422 of the
Internal Revenue Code. If the participant does not dispose of the shares
acquired upon exercise of an incentive stock option within one year after the
transfer of shares to the participant and within two years from grant of the
option, the participant will realize no taxable income as a result of the grant
or exercise of such option, and any gain or loss that is subsequently realized
upon a sale or other disposition of the shares may be treated as long-term
capital gain or loss, as the case may be. Under these circumstances, we will not
be entitled to a deduction for federal income tax purposes with respect to
either the issuance of the incentive stock options or the transfer of shares
upon their exercise.
If the participant disposes of the shares acquired upon exercise of
incentive stock options before the above time periods expire, the participant
will recognize ordinary income in the year in which the disqualifying
disposition occurs, the amount of which will generally be the lesser of (1) the
excess of the market value of the shares on the date of exercise over the option
price, or (2) the gain recognized on such disposition. Such amount will
ordinarily be deductible by us for federal income tax purposes in the same year,
if the amount constitutes reasonable compensation. Moreover, we may be required
to satisfy certain federal income tax withholding requirements with respect to
such compensation, although deductibility of the compensation will not be
conditioned on satisfying withholding requirements. In addition, the excess, if
any, of the amount realized on a disqualifying disposition over the market value
of the shares on the date of exercise will be treated as capital gain.
NONQUALIFIED OPTIONS
A participant who acquires shares by exercise of a nonqualified option
generally realizes taxable ordinary income at the time of exercise equal to the
difference between the exercise price and the fair market value of the shares on
the date of exercise. Such amount ordinarily will be deductible by us in the
same year, if the amount constitutes reasonable compensation. Moreover, we will
be required to satisfy certain federal income tax withholding requirements with
respect to such compensation, although deductibility of the compensation will
not be conditioned on satisfying withholding requirements. Subsequent
appreciation or decline in the value of the shares will generally be treated as
capital gain or loss on the sale or other disposition of the shares.
CAPITAL GAINS RATES
If a participant recognizes capital gain upon the sale or other disposition
of shares acquired upon exercise of options, the tax rate applicable to such
gain will depend on a number of factors, including the date the options are
granted, the date the options are exercised, the date the shares are sold or
otherwise disposed of, the length of time the participant holds the shares, and
the participant's marginal tax bracket. Participants should consult their own
tax advisors concerning the short-term and long-term capital gain tax rates, as
well as the other tax consequences of participation in the 1997 Stock Option
Plan.
WITHHOLDING PAYMENTS
If upon the exercise of any nonqualified option or a disqualifying
disposition, within the meaning of Section 422 of the Internal Revenue Code, of
shares acquired upon exercise of an incentive stock option, we must pay any
amount for income tax withholding, in the Committee's discretion, either the
participant shall pay such amount to us, or the amount of Common Shares we
deliver to the participant will be appropriately reduced, to reimburse us for
such payment.
We have the right to withhold the amount of such taxes from any other sums
or property due or to become due from us to the participant on such terms and
conditions as the Committee shall prescribe. We may also defer issuance of the
stock upon exercise of such option until the participant pays us the amount of
any such tax. The Committee may, in its discretion, permit participants to
satisfy such withholding obligations, in whole or in part, by electing to have
the amount of Common Shares delivered or deliverable by us upon exercise of a
stock option appropriately reduced, or by electing to tender Common Shares back
to us after exercise of a stock option to reimburse us for such income tax
withholding, subject to such rules and
17
regulations, if any, as the Committee may adopt. The Committee may make such
other arrangements with respect to income tax withholding as it shall determine.
LIMITATION ON COMPENSATION DEDUCTION
Publicly-held corporations may not deduct compensation paid in a year to
some of their executive officers in excess of $1 million. The employees covered
by the $1 million annual compensation deduction limitation are the chief
executive officer and those employees whose annual compensation is required to
be reported to the Securities and Exchange Commission because the employee is
one of the company's four highest compensated employees for the taxable year
(other than the chief executive officer). Ordinary income attributable to stock
options generally is included in an employee's compensation for purposes of the
$1 million limitation on deductibility of compensation.
There is an exception to the $1 million compensation deduction limitation
for compensation paid pursuant to a qualified performance-based compensation
plan. Compensation attributable to a stock option satisfies the qualified
performance-based compensation exception if the following conditions are met:
- the grant is made by a compensation committee comprised solely of outside
directors,
- the plan under which the options may be granted states the maximum number
of shares with respect to which options may be granted during a specified
period to any employee,
- under the terms of the option, the amount of compensation the employee
would receive is based solely on an increase in the value of the shares
after the date of the grant, for example, the option is granted at an
exercise price equal to or greater than fair market value as of the date
of the grant, and
- the individuals eligible to receive grants, the maximum number of shares
for which grants may be made to any employee, over a specified period,
and the exercise price of the options and other disclosures required by
SEC proxy rules are disclosed to shareholders and subsequently approved
by them.
Our grants under the 1997 Stock Option Plan have not historically met all
of the foregoing criteria. If the amount of compensation a covered employee may
receive under the grant is not based solely on an increase in the value of the
shares after the date of the grant (for example, an option is granted with an
exercise price that is less than the fair market value of the underlying Common
Shares as of the date of the grant), none of the compensation attributable to
the grant is qualified performance-based compensation unless the grant is made
subject to reaching a performance goal that has been previously established and
approved by our shareholders and otherwise qualifies under Section 162(m) of the
Internal Revenue Code. We have not established any performance goals for grants
under the 1997 Stock Option Plan that meet the requirements of the
performance-based compensation standard required by Section 162(m) of the
Internal Revenue Code.
ACCOUNTING TREATMENT
Generally, under current accounting rules applicable to us, neither the
grant nor the exercise of an incentive stock option or a nonqualified option
under the 1997 Stock Option Plan requires any charge against earnings, if the
exercise price of the option is equal to the fair market value of the shares on
the date of grant. Footnote disclosure of the value of such options, however, is
required. If the exercise price is below the fair market value of the shares on
the date of grant, an earnings charge equal to the difference will be required
either at the date of grant or possibly over the term of the option. If the
optionee is allowed to pay the exercise price of an option with shares held less
than six months (or possibly, if such price is paid by our withholding shares
issuable upon exercise of the option), we will recognize an earnings charge
equal to the difference between the fair market value of the shares issuable
upon exercise of the option and the exercise price. In addition, if we make some
changes to outstanding options, such as extending their exercisability after
termination of employment or making changes described under the caption,
"Extraordinary Transactions," a new grant date might occur, resulting in an
earnings charge equal to the excess, if any, of the fair market value on the
date of the change of the shares issuable upon exercise of the option and the
exercise price.
18
In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement No. 123R ("SFAS 123R"), a revision to Statement No. 123, "Accounting
for Stock-Based Compensation." This standard requires the Company to measure the
cost of employee services received in exchange for equity awards, including
stock options, based on the grant date fair value of the awards. The cost will
be recognized as compensation expense over the vesting period of the awards. The
Company is required to adopt SFAS 123R beginning January 1, 2006. The standard
provides for a prospective application. Under this method, the Company will
begin recognizing compensation cost for equity based compensation for all new or
modified grants after the date of adoption. In addition, the Company will
recognize the unvested portion of the grant date fair value of awards issued
prior to adoption based on the fair values previously calculated for disclosure
purposes. At December 31, 2004, the aggregate value of unvested options, as
determined using a Black-Scholes option valuation model, was $1,413,000. Upon
adoption of SFAS 123R, approximately $750,000 of this amount will be recognized
over the remaining vesting period of these options.
OPTION GRANTS UNDER THE PLANS
Options may be granted under the 1997 Stock Option Plan at the Committee's
discretion, subject to shareholder approval of the proposed amendment to the
1997 Stock Option Plan if options are granted in excess of the 3,900,000 Common
Shares currently authorized and before such approval. The following table sets
forth, as to Robert L. Chioini and Thomas E. Klema, all current executive
officers as a group, all current directors who are not executive officers as a
group, all employees (including officers) who are not executive officers, as a
group, and all other consultants and advisors, as a group, the options granted
under the 1997 Stock Option Plan, during the fiscal year ended December 31, 2004
and during the period from January 1, 2005 through April 7, 2005:
NEW PLAN BENEFITS
ROCKWELL MEDICAL TECHNOLOGIES, INC. 1997 STOCK OPTION PLAN
NUMBER OF COMMON NUMBER OF COMMON
SHARES SUBJECT TO OPTIONS SHARES SUBJECT TO OPTIONS
GRANTED UNDER THE PLANS GRANTED UNDER THE PLANS
IN THE FISCAL YEAR ENDED FROM JANUARY 1, 2005
NAME AND POSITION DECEMBER 31, 2004 TO APRIL 7, 2005
----------------- ------------------------- -------------------------
Robert L. Chioini, President and
Chief Executive Officer......................... 500,000 -0-
Thomas E. Klema, Vice President and
Chief Financial Officer......................... 200,000 -0-
All current executive officers as a group (2
persons)........................................ 700,000 -0-
All current directors who are not executive
officers as a group (2 persons)................. 70,000 -0-
All employees (including officers) who are not
executive officers as a group (48 persons)...... 88,000 -0-
The dollar values of these options cannot be determined because they depend
on the market value of the underlying shares on the date of exercise. As of
April 7, 2005, the closing sales price of our Common Shares was $3.06. No
associate of any director, nominee or executive officer has been granted options
under the 1997 Stock Option Plan. In addition, no person excluded from the table
above has received five percent or more of the options authorized under the 1997
Stock Option Plan, in the aggregate.
APPROVAL OF THE 1997 STOCK OPTION PLAN AMENDMENT
Shareholder approval of the proposed amendments to the 1997 Stock Option
Plan requires the approval by a majority of the votes cast by the holders of
Common Shares at the annual meeting and entitled to vote on the action.
Abstentions, withheld votes and broker non-votes will not be deemed votes cast
in determining approval of this proposal, but will be counted in determining the
number of Common Shares present or represented by proxy in determining whether a
quorum is present. We do not intend to place the proposed
19
amendment to the 1997 Stock Option Plan into effect unless such approval is
obtained at the meeting, and such approval is sought, in part, to exempt the
granting of options under the 1997 Stock Option Plan from the provisions of
Section 162(m) of the Internal Revenue Code and in order to comply with
shareholder approval requirements for securities traded on The Nasdaq SmallCap
Market.
A FULL COPY OF THE 1997 STOCK OPTION PLAN, AS PROPOSED TO BE AMENDED,
MARKED TO SHOW THE PROPOSED CHANGE, IS ATTACHED AS APPENDIX A TO THIS PROXY
STATEMENT. THE MAJOR FEATURES OF THE 1997 STOCK OPTION PLAN, AS PROPOSED TO BE
AMENDED, ARE SUMMARIZED ABOVE, BUT THIS IS ONLY A SUMMARY AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE ACTUAL TEXT.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT TO THE 1997 STOCK OPTION PLAN, AND YOUR PROXY WILL BE SO VOTED UNLESS
YOU SPECIFY OTHERWISE.
EQUITY COMPENSATION PLAN INFORMATION
The following information is provided as of December 31, 2004 with respect
to our compensation plans, including individual compensation arrangements, under
which our equity securities are authorized for issuance:
(C)
NUMBER OF SECURITIES
(A) (B) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
------------- ----------------------- ------------------- -------------------------
Equity compensation plans approved
by security holders............... 2,707,717 $2.12 453,355
Equity compensation plans not
approved by security holders...... -0- -0- -0-
--------- ----- -------
Total............................... 2,707,717 $2.12 453,355
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Exchange
Act"), requires our officers and Directors, and persons who own more than ten
percent of a registered class of our equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, Directors and greater than ten percent
shareholders are required by regulation of the Commission to furnish us with
copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such forms received by us, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, we believe that, during our fiscal year ended
December 31, 2004, all filing requirements under Section 16(a) of the Exchange
Act applicable to our officers and directors and persons who own more than ten
percent of a registered class of our equity securities were complied with,
except that Kenneth L. Holt and Ronald D. Boyd, directors of the Company, each
filed one Form 4 late relating to options granted on December 22, 2004.
20
III. OTHER MATTERS
ANNUAL REPORT
A copy of the Annual Report to Shareholders for the fiscal year ended
December 31, 2004 accompanies this Proxy Statement. We file an Annual Report on
Form 10-KSB with the Securities and Exchange Commission. We will provide,
without charge, to each person being solicited by this Proxy Statement, upon the
written request of any such person, a copy of our Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2004 (as filed with the Securities and
Exchange Commission, excluding exhibits for which a reasonable charge shall be
imposed). If a person requesting the Annual Report was not a shareholder of
record on April 7, 2005, the request must contain a good faith representation
that the person making the request was a beneficial owner of Common Shares at
the close of business on such date. All such requests should be directed to
Thomas E. Klema, Chief Financial Officer and Secretary, Rockwell Medical
Technologies, Inc., 30142 Wixom Road, Wixom, Michigan 48393.
INDEPENDENT ACCOUNTANTS
Plante & Moran, PLLC is our independent accountant and has reported on our
consolidated financial statements included in our Annual Report which
accompanies this proxy statement. Plante & Moran, PLLC has served in this
capacity since December 1998. Our independent accountants are appointed by the
Audit Committee of the Board of Directors. The Audit Committee has reappointed
Plante & Moran, PLLC as independent accountants for the year ending December 31,
2005.
Representatives of Plante & Moran, PLLC are expected to be present at the
Annual Meeting of the Shareholders and will have the opportunity to make a
statement at the meeting if they desire to do so. The representatives are also
expected to be available to respond to appropriate questions.
The following table presents aggregate fees billed for each of the years
ended December 31, 2004 and 2003 for professional services rendered by Plante &
Moran, PLLC in the following categories:
FISCAL YEAR ENDED
DECEMBER 31
-----------------
2004 2003
------- -------
Audit Fees(1)............................................... $78,525 $74,700
Audit-Related Fees.......................................... $ 1,215 -0-
Tax Fees(2)................................................. $ 9,880 $15,000
All Other Fees.............................................. $ -0- -0-
---------------
(1) Consists of fees for the audit of our annual financial statements, review of
financial statements included in our Form 10-QSBs and services provided in
connection with our Proxy Statement.
(2) Consists of tax return preparation fees.
Before Plante & Moran, PLLC is engaged by us to render audit or non-audit
services, the engagement is approved by our Audit Committee.
SHAREHOLDER PROPOSALS
A shareholder proposal which is intended to be presented at our 2006 Annual
Meeting of Shareholders must be received by our Secretary at the Company's
principal executive office at 30142 Wixom Road, Wixom, Michigan 48393 before
December 24, 2005 to be considered for inclusion in the Proxy Statement and
Proxy relating to that meeting. Such proposal should be sent by certified mail,
return receipt requested.
We must receive notice of any proposals of shareholders that are intended
to be presented at the Company's 2006 Annual Meeting of Shareholders, but that
are not intended to be considered for inclusion in our Proxy Statement and Proxy
related to that meeting, no later than March 7, 2006 to be considered timely.
Such proposals should be sent by certified mail, return receipt requested and
addressed to our Secretary at the
21
Company's principal executive office at 30142 Wixom Road, Wixom, Michigan 48393.
If we do not have notice of the matter by that date, our form of proxy in
connection with that meeting may confer discretionary authority to vote on that
matter, and the persons named in our form of proxy will vote the shares
represented by such proxies in accordance with their best judgment.
OTHER BUSINESS
Neither us nor the members of our Board of Directors intend to bring before
the Annual Meeting any matters other than those set forth in the Notice of
Annual Meeting of Shareholders, and we and they have no present knowledge that
any other matters will be presented for action at the meeting by others. If any
other matters properly come before such meeting, however, it is the intention of
the persons named in the enclosed form of proxy to vote in accordance with their
best judgment.
By Order of the Board of Directors
/s/ THOMAS E. KLEMA
THOMAS E. KLEMA
Secretary
Wixom, Michigan
April 18, 2005
22
APPENDIX A
ROCKWELL MEDICAL TECHNOLOGIES, INC.
1997 STOCK OPTION PLAN
1. Definitions: As used herein, the following terms shall have the
following meanings:
(a) "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the applicable rules and regulations thereunder.
(b) "Committee" shall mean, (i) with respect to administration of the
Plan regarding Participants who are subject to Section 16(a) and (b) of the
Exchange Act, a committee meeting the standards of Rule 16b-3 of the Rules
and Regulations under the Exchange Act, or any similar successor rule,
appointed by the Board of Directors of the Company to perform any of the
functions and duties of the Committee under the Plan, or the Board of
Directors as a whole, and (ii) with respect to administration of the Plan
regarding all other Participants, such committee or the Board of Directors
of the Company, as described in clause (i), or such other committee or
entity appointed by the Board of Directors of the Company to perform any of
the functions and duties of the Committee under the Plan.
(c) "Common Shares" shall mean the Common Shares, no par value per
share, of the Company.
(d) "Company" shall mean Rockwell Medical Technologies, Inc., a
Michigan corporation, or any successor thereof.
(e) "Discretion" shall mean the sole discretion of the Committee, with
no requirement whatsoever that the Committee follow past practices, act in
a manner consistent with past practices, or treat any key employee,
director, consultant or advisor in a manner consistent with the treatment
afforded other key employees, directors, consultants or advisors with
respect to the Plan or otherwise.
(f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(g) "Incentive Option" shall mean an option to purchase Common Shares
which meets the requirements set forth in the Plan and also is intended to
be, and qualifies as, an incentive stock option within the meaning of
Section 422 of the Code.
(h) "Nonqualified Option" shall mean an option to purchase Common
Shares which meets the requirements set forth in the Plan but is not
intended to be, or does not qualify as, an incentive stock option within
the meaning of the Code.
(i) "Participant" shall mean any individual designated by the
Committee under Paragraph 6 for participation in the Plan.
(j) "Plan" shall mean this Rockwell Medical Technologies, Inc. 1997
Stock Option Plan.
(k) "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
(l) "Subsidiary" shall mean any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of all classes of outstanding voting equity
interests.
2. Purpose of Plan: The purpose of the Plan is to provide key employees
(including officers), directors, consultants and advisors of the Company and its
Subsidiaries (collectively, "key employees") with an increased incentive to make
significant and extraordinary contributions to the long-term performance and
growth of the Company and its Subsidiaries, to join the interests of key
employees, directors, consultants and advisors with the interests of the
shareholders of the Company, and to facilitate attracting and retaining key
employees, directors, consultants and advisors of exceptional ability.
A-1
3. Administration: The Plan shall be administered by the Committee.
Subject to the provisions of the Plan, the Committee shall determine, from those
eligible to be Participants under the Plan, the persons to be granted stock
options, the amount of stock to be optioned to each such person, the time such
options shall be granted and the terms and conditions of any stock options. Such
terms and conditions may, in the Committee's Discretion, include, without
limitation, provisions providing for termination of the option, forfeiture of
the gain on any option exercises or both if the Participant competes with the
Company or otherwise acts contrary to the Company's interests, and provisions
imposing restrictions, potential forfeiture or both on shares acquired upon
exercise of options granted pursuant to this Plan. The Committee may condition
any grant on the potential Participant's agreement to such terms and conditions.
Subject to the provisions of the Plan, the Committee is authorized to
interpret the Plan, to promulgate, amend and rescind rules and regulations
relating to the Plan and to make all other determinations necessary or advisable
for its administration. Interpretation and construction of any provision of the
Plan by the Committee shall, unless otherwise determined by the Board of
Directors of the Company, be final and conclusive. A majority of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, or acts approved in writing by a
majority of the Committee, shall be the acts of the Committee.
4. Indemnification: In addition to such other rights of indemnification as
they may have, the members of the Committee shall be indemnified by the Company
in connection with any claim, action, suit or proceeding relating to any action
taken or failure to act under or in connection with the Plan or any option
granted hereunder to the full extent provided for under the Company's articles
of incorporation or bylaws with respect to indemnification of directors of the
Company.
5. Maximum Number of Shares Subject to Plan: The maximum number of shares
with respect to which stock options may be granted under the Plan shall be an
aggregate of 4,500,000 Common Shares, which may consist in whole or in part of
authorized and unissued or reacquired Common Shares. Unless the Plan shall have
been terminated, shares covered by the unexercised portion of canceled, expired
or otherwise terminated options under the Plan shall again be available for
option and sale.
Subject to Paragraph 16, the number and type of shares subject to each
outstanding stock option, the option price with respect to outstanding stock
options, the aggregate number and type of shares remaining available under the
Plan, and the maximum number and type of shares that may be granted to any
Participant in any fiscal year of the Company pursuant to Paragraph 6, shall be
subject to such adjustment as the Committee, in its Discretion, deems
appropriate to reflect such events as stock dividends, stock splits,
recapitalizations, mergers, statutory share exchanges or reorganizations of or
by the Company; provided, that no fractional shares shall be issued pursuant to
the Plan, no rights may be granted under the Plan with respect to fractional
shares, and any fractional shares resulting from such adjustments shall be
eliminated from any outstanding option.
6. Participants: The Committee shall determine and designate from time to
time, in its Discretion, those key employees (including officers), directors,
consultants and advisors of or to the Company or any Subsidiary to whom options
are to be granted and who thereby become Participants under the Plan; provided,
however, that (a) Incentive Options shall be granted only to employees (as
defined in the Code) of the Company or a corporate Subsidiary, to the extent
required by Section 422 of the Code, or any successor provision, and (b) no
Participant may be granted stock options to purchase more than 500,000 Common
Shares in the aggregate in any fiscal year of the Company, subject to any
adjustments provided in the final paragraph of Paragraph 5 and in Paragraph 16.
7. Allotment of Shares: The Committee shall determine and fix the number
of Common Shares to be offered to each Participant; provided, that no Incentive
Option may be granted under the Plan to any one Participant which would result
in the aggregate fair market value, determined as of the date the option is
granted, of the underlying stock with respect to which Incentive Options are
exercisable for the first time by such individual during any calendar year
(under all of such plans of the Company and its parent and Subsidiary
corporations) exceeding $100,000.
A-2
8. Option Price: Subject to the rules set forth in this Paragraph 8, the
Committee, in its Discretion, shall establish the option price at the time any
option is granted. With respect to an Incentive Option, such option price shall
not be less than 100% of the fair market value of the stock on the date on which
such option is granted; provided, that with respect to an Incentive Option
granted to an employee who at the time of the grant owns (after applying the
attribution rules of Section 424(d) of the Code) more than 10% of the total
combined voting stock of the Company or of any parent or Subsidiary, the option
price shall not be less than 110% of the fair market value of the stock subject
to the Incentive Option on the date such option is granted. With respect to a
Nonqualified Option, the option price shall be not less than the par value, if
any, of the Common Shares. Fair market value of a share shall be determined by
the Committee and may be determined by using the closing sale price of the
Company's stock on any exchange or other market on which the Common Shares shall
be traded on such date, or if there is no sale on such date, on the next
following date on which there is a sale, or the average of the closing bid and
asked prices in any market or quotation system in which the Common Shares shall
be listed or traded on such date. The option price will be subject to adjustment
in accordance with the provisions of Paragraphs 5 and 16 of the Plan.
9. Granting and Exercise of Options: The granting of options under the
Plan shall be effected in accordance with determinations made by the Committee
pursuant to the provisions of the Plan, by execution of instruments in writing
in form approved by the Committee. Such instruments shall constitute binding
contracts between the Company and the Participant.
Subject to the terms of the Plan, the Committee, in its Discretion, may
grant to Participants Incentive Options, Nonqualified Options or any combination
thereof. Each option granted under the Plan shall designate the number of shares
covered thereby, if any, with respect to which the option is an Incentive Option
and the number of shares covered thereby, if any, with respect to which the
option is a Nonqualified Option.
Subject to the terms of the Plan, each option granted under the Plan shall
be exercisable at any such time or times or in any such installments as may be
determined by the Committee in its Discretion; provided, that the aggregate fair
market value (determined as of the date the option is granted) of the underlying
stock with respect to which Incentive Options are exercisable for the first time
by such individual during any calendar year (under all of such plans of the
Company and its parent and Subsidiary corporations) shall not exceed $100,000.
Except as provided in Paragraph 13, options may be exercised only while the
Participant is an employee, director, consultant or advisor of the Company or a
Subsidiary.
Notwithstanding any other term or provision of this Plan, but subject to
the requirements of the Code with respect to Incentive Options that are intended
to remain Incentive Options, in connection with a Participant ceasing to be an
employee of the Company or a Subsidiary for any reason, the stock option
agreement may provide for the acceleration of, or the Committee may accelerate,
in its Discretion (exercised at the date of the grant of the stock option or
after the date of grant), in whole or in part, the time or times or installments
with respect to which any option granted under this Plan shall be exercisable in
connection with termination of a Participant's employment with the Company or a
Subsidiary, subject to any restrictions, terms and conditions fixed by the
Committee either at the date of the award or at the date it exercises such
Discretion.
Successive stock options may be granted to the same Participant, whether or
not the option or options previously granted to such Participant remain
unexercised. A Participant may exercise any option granted under the Plan, if
then exercisable, notwithstanding that options granted to such Participant prior
to the option then being exercised remain unexercised.
10. Payment of Option Price: At the time of the exercise in whole or in
part of any option granted under this Plan, payment in full in cash, or with the
consent of the Committee, in its Discretion, in Common Shares or by a promissory
note payable to the order of the Company which is acceptable to the Committee,
shall be made by the Participant for all shares so purchased. Such payment may,
with the consent of the Committee, in its Discretion, also consist of a cash
down payment and delivery of such a promissory note in the amount of the unpaid
exercise price. In the Discretion of, and subject to such conditions as may be
established by, the Committee, payment of the option price may also be made by
the Company retaining from the shares to be delivered upon exercise of the stock
option that number of shares having a fair market value on the date of
A-3
exercise equal to the option price of the number of shares with respect to which
the Participant exercises the option. In the Discretion of the Committee, a
Participant may exercise an option, if then exercisable, in whole or in part, by
delivery to the Company of written notice of the exercise in such form as the
Committee may prescribe, accompanied by irrevocable instructions to a stock
broker to promptly deliver to the Company full payment for the shares with
respect to which the option is exercised from the proceeds of the stock broker's
sale of or loan against some or all of the shares. Such payment may also be made
in such other manner as the Committee determines is appropriate, in its
Discretion. No Participant shall have any of the rights of a shareholder of the
Company under any option until the actual issuance of shares to such
Participant, and prior to such issuance no adjustment shall be made for
dividends, distributions or other rights in respect of such shares, except as
provided in Paragraphs 5 and 16.
11. Transferability of Option: Except as otherwise provided in this
Paragraph 11, (i) to the extent required by Section 422 of the Code, or any
successor section, but only with respect to Incentive Options, or (ii) to the
extent determined by the Committee in its Discretion (either by resolution or by
a provision in, or amendment to, the option), (a) no option granted under the
Plan to a Participant shall be transferable by such Participant otherwise than
(1) by will, or (2) by the laws of descent and distribution or, (3) with respect
to Nonqualified Options only (unless permitted by Section 422 of the Code or any
successor section), pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act, or the
rules thereunder, and (b) such option shall be exercisable, during the lifetime
of the Participant, only by the Participant.
The Committee may, in its Discretion, authorize all or a portion of the
options to be granted to an optionee to be on terms which permit transfer by
such optionee to, and the exercise of such option by, (i) the spouse, children
or grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or
trusts for the exclusive benefit of such Immediate Family Members, (iii) a
partnership in which such Immediate Family Members are the only partners, or
(iv) such other persons or entities as determined by the Committee, in its
Discretion, on such terms and conditions as the Committee, in its Discretion,
may determine; provided, that (y) the stock option agreement pursuant to which
such options are granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Paragraph 11, and
(z) subsequent transfers of transferred options shall be prohibited except for
transfers the original optionee would be permitted to make (if he or she were
still the owner of the option) in accordance with this Paragraph 11.
Following transfer, any such options shall continue to be subject to the
same terms and conditions as were applicable immediately before transfer,
provided, that for purposes of Paragraphs 9, 10, 14, 16 and 18 the term
"Participant" shall be deemed to refer to the transferee. The events of
termination of employment of Paragraph 13 shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods, specified
in Paragraph 13. The original optionee shall remain subject to withholding taxes
and related requirements upon exercise provided in Paragraph 15. The Company
shall have no obligation to provide any notice to any transferee, including,
without limitation, notice of any termination of the option as a result of
termination of the original optionee's employment with, or other service to, the
Company.
12. Continuance of Employment; No Right to Continued Employment: The
Committee may require, in its Discretion, that any Participant under the Plan to
whom an option shall be granted shall agree in writing as a condition of the
granting of such option to remain in his or her position as an employee,
director, consultant or advisor of the Company or a Subsidiary for a designated
minimum period from the date of the granting of such option as shall be fixed by
the Committee.
Nothing contained in the Plan or in any option granted pursuant to the
Plan, nor any action taken by the Committee hereunder, shall confer upon any
Participant any right with respect to continuation of employment, consultation
or other service by or to the Company or a Subsidiary nor interfere in any way
with the right of the Company or a Subsidiary to terminate such person's
employment, consultation or other service at any time.
A-4
13. Termination of Employment; Expiration of Options: Subject to the other
provisions of the Plan, including, without limitation, Paragraphs 9 and 16 and
this Paragraph 13, all rights to exercise options shall terminate when a
Participant ceases to be an employee, director, consultant or advisor of or to
the Company or a Subsidiary for any cause, except that the Committee may, in its
Discretion, permit the exercise of all or any portion of the options granted to
such Participant
(i) for a period not to exceed three months following such termination
with respect to Incentive Options that are intended to remain Incentive
Options if such termination is not due to death or permanent disability of
the Participant,
(ii) for a period not to exceed one year following termination of
employment with respect to Incentive Options that are Intended to remain
Incentive Options if termination of employment is due to the death or
permanent disability of the Participant, and
(iii) for a period not to extend beyond the expiration date with
respect to Nonqualified Options or Incentive Options that are not intended
to remain Incentive Options,
all subject to any restrictions, terms and conditions fixed by the Committee
either at the date of the award or at the date it exercises such Discretion. In
no event, however, shall an option be exercisable after its expiration date,
and, unless the Committee in its Discretion determines otherwise (pursuant to
Paragraph 9 or Paragraph 16), an option may only be exercised after termination
of a Participant's employment, consultation or other service by or to the
Company to the extent exercisable on the date of such termination or to the
extent exercisable as a result of the reason for such termination. The Committee
may evidence the exercise of its Discretion under this Paragraph 13 in any
manner it deems appropriate, including by resolution or by a provision in, or
amendment to, the option.
If not sooner terminated, each stock option granted under the Plan shall
expire not more than 10 years from the date of the granting thereof; provided,
that with respect to an Incentive Option granted to a Participant who, at the
time of the grant, owns (after applying the attribution rules of Section 424(d)
of the Code) more than 10% of the total combined voting stock of all classes of
stock of the Company or of any parent or Subsidiary, such option shall expire
not more than 5 years after the date of granting thereof.
14. Investment Purpose: If the Committee in its Discretion determines that
as a matter of law such procedure is or may be desirable, it may require a
Participant, upon any exercise of any option granted under the Plan or any
portion thereof and as a condition to the Company's obligation to deliver
certificates representing the shares subject to exercise, to execute and deliver
to the Company a written statement, in form satisfactory to the Committee,
representing and warranting that the Participant's purchase of Common Shares
upon exercise thereof shall be for such person's own account, for investment and
not with a view to the resale or distribution thereof and that any subsequent
sale or offer for sale of any such shares shall be made either pursuant to (a) a
Registration Statement on an appropriate form under the Securities Act, which
Registration Statement has become effective and is current with respect to the
shares being offered and sold, or (b) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption the
Participant shall, prior to any offer for sale or sale of such shares, obtain a
favorable written opinion from counsel for or approved by the Company as to the
availability of such exemption. The Company may endorse an appropriate legend
referring to the foregoing restriction upon the certificate or certificates
representing any shares issued or transferred to the Participant upon exercise
of any option granted under the Plan.
15. Withholding Payments: If upon the exercise of any Nonqualified Option
or a disqualifying disposition (within the meaning of Section 422 of the Code)
of shares acquired upon exercise of an Incentive Option, there shall be payable
by the Company or a Subsidiary any amount for income tax withholding, in the
Committee's Discretion, either the Participant shall pay such amount to the
Company, or the amount of Common Shares delivered by the Company to the
Participant shall be appropriately reduced, to reimburse the Company or such
Subsidiary for such payment. The Company or any of its Subsidiaries shall have
the right to withhold the amount of such taxes from any other sums or property
due or to become due from the Company or any of its Subsidiaries to the
Participant upon such terms and conditions as the Committee shall prescribe. The
Company may also defer issuance of the stock upon exercise of such option until
payment by the
A-5
Participant to the Company of the amount of any such tax. The Committee may, in
its Discretion, permit Participants to satisfy such withholding obligations, in
whole or in part, by electing to have the amount of Common Shares delivered or
deliverable by the Company upon exercise of a stock option appropriately
reduced, or by electing to tender Common Shares back to the Company subsequent
to exercise of a stock option to reimburse the Company or such Subsidiary for
such income tax withholding, subject to such rules and regulations, if any, as
the Committee may adopt. The Committee may make such other arrangements with
respect to income tax withholding as it shall determine.
16. Extraordinary Transactions: In case the Company (i) consolidates with
or merges into any other corporation or other entity and is not the continuing
or surviving entity of such consolidation or merger, or (ii) permits any other
corporation or other entity to consolidate with or merge into the Company and
the Company is the continuing or surviving entity but, in connection with such
consolidation or merger, the Common Shares are changed into or exchanged for
stock or other securities of any other corporation or other entity or cash or
any other assets, or (iii) transfers all or substantially all of its properties
and assets to any other corporation or other person or entity, or (iv) dissolves
or liquidates, or (v) effects a capital reorganization or reclassification in
such a way that holders of Common Shares shall be entitled to receive stock,
securities, cash or other assets with respect to or in exchange for the Common
Shares, then, and in each such case, proper provision shall be made so that,
each Participant holding a stock option upon the exercise of such option at any
time after the consummation of such consolidation, merger, transfer,
dissolution, liquidation, reorganization or reclassification (each transaction,
for purposes of this Paragraph 16, being herein called a "Transaction"), shall
be entitled to receive (at the aggregate option price in effect for all Common
Shares issuable upon such exercise immediately prior to such consummation and as
adjusted to the time of such Transaction), in lieu of Common Shares issuable
upon such exercise prior to such consummation, the stock and other securities,
cash and assets to which such Participant would have been entitled upon such
consummation if such Participant had so exercised such stock option in full
immediately prior thereto (subject to adjustments subsequent to such Transaction
provided for in Paragraph 5).
Notwithstanding anything in the Plan to the contrary, in connection with
any Transaction and effective as of a date selected by the Committee, which date
shall, in the Committee's judgment, be far enough in advance of the Transaction
to permit Participants holding stock options to exercise their options and
participate in the Transaction as a holder of Common Shares, the Committee,
acting in its Discretion without the consent of any Participant, may effect one
or more of the following alternatives with respect to all of the outstanding
stock options (which alternatives may be made conditional on the occurrence of
the applicable Transaction and which may, if permitted by law, vary among
individual Participants): (a) accelerate the time at which stock options then
outstanding may be exercised so that such stock options may be exercised in full
for a limited period of time on or before a specified date fixed by the
Committee after which specified date all unexercised stock options and all
rights of Participants thereunder shall terminate; (b) accelerate the time at
which stock options then outstanding may be exercised so that such stock options
may be exercised in full for their then remaining term; or (c) require the
mandatory surrender to the Company of outstanding stock options held by such
Participants (irrespective of whether such stock options are then exercisable)
as of a date, before or not later than sixty days after such Transaction,
specified by the Committee, and in such event the Company shall thereupon cancel
such stock options and shall pay to each Participant an amount of cash equal to
the excess of the fair market value of the aggregate Common Shares subject to
such stock option, determined as of the date such Transaction is effective, over
the aggregate option price of such shares, less any applicable withholding
taxes; provided, however, the Committee shall not select an alternative (unless
consented to by the Participant) such that, if a Participant exercised his or
her accelerated stock option pursuant to alternative (a) or (b) and participated
in the Transaction or received cash pursuant to alternative (c), the alternative
would result in the Participant's owing any money by virtue of the operation of
Section 16(b) of the Exchange Act. If all such alternatives have such a result,
the Committee shall, in its Discretion, take such action to put such Participant
in as close to the same position as such Participant would have been in had
alternative (a), (b) or (c) been selected but without resulting in any payment
by such Participant pursuant to Section 16(b) of the Exchange Act.
Notwithstanding the foregoing, with the consent of affected Participants, each
with respect to such Participant's option only, the Committee may in lieu of the
foregoing make such provision with respect to any Transaction as it deems
appropriate.
A-6
17. Effectiveness of Plan: This Plan shall be effective on the date the
Board of Directors of the Company adopts this Plan, provided, that the
shareholders of the Company approve the Plan within 12 months before or after
its adoption by the Board of Directors. Options may be granted before
shareholder approval of this Plan, but each such option shall be subject to
shareholder approval of this Plan. No option granted under this Plan shall be
exercisable unless and until this Plan shall have been approved by the Company's
shareholders.
18. Termination, Duration and Amendments to the Plan: The Plan may be
abandoned or terminated at any time by the Board of Directors of the Company.
Unless sooner terminated, the Plan shall terminate on the date ten years after
the earlier of its adoption by the Board of Directors or its approval by the
shareholders of the Company, and no stock options may be granted under the Plan
thereafter. The termination of the Plan shall not affect the validity of any
option which is outstanding on the date of termination.
For the purpose of conforming to any changes in applicable law or
governmental regulations, or for any other lawful purpose, the Board of
Directors shall have the right, with or without approval of the shareholders of
the Company, to amend or revise the terms of this Plan or any option agreement
under this Plan at any time; provided, however, that (i) to the extent required
by Section 162(m) of the Code and related regulations, or any successor rule,
but only with respect to amendments or revisions affecting Participants whose
compensation is subject to Section 162(m) of the Code, and to the extent
required by Section 422 of the Code, or any successor section, but only with
respect to Incentive Options, no such amendment or revision shall increase the
maximum number of shares in the aggregate which are subject to this Plan
(subject, however, to the provisions of Paragraphs 5 and 16) without the
approval or ratification of the shareholders of the Company, and (ii) no such
amendment or revision shall change the option price (except as contemplated by
Paragraphs 5 and 16) or alter or impair any option which shall have been
previously granted under this Plan, in a manner adverse to a Participant,
without the consent of such Participant.
As adopted by the Board of Directors on July 15, 1997, amended by the Board
of Directors as of April 7, 1999, and further amended by the Board of Directors
on January 25, 2001, further amended by the Board of Directors on October 11,
2001, further amended by the Board of Directors on April 1, 2003, further
amended by the Board of Directors on June 18, 2003, further amended by the Board
of Directors on March 31, 2004, and further amended by the Board of Directors on
March 21, 2005.
A-7
ANNUAL MEETING OF SHAREHOLDERS OF
ROCKWELL MEDICAL TECHNOLOGIES, INC.
MAY 26, 2005
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
| Please detach along perforated line and mail in the envelope provided. |
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE /X/
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|
| FOR AGAINST ABSTAIN
1. Election of Class II Director: | 2. Approval of an amendment to the Rockwell Medical / / / / / /
| Technologies, Inc. 1997 Stock Option Plan to increase
| the number of Common Shares reserved for issuance
NOMINEE: | pursuant to the exercise of options granted under the
/ / FOR Kenneth L. Holt | 1997 Stock Option Plan by 600,000 shares, from
| 3,900,000 to 4,500,000 shares.
/ / WITHHOLD AUTHORITY |
| 3. In their discretion with respect to any other matters
| that may properly come before the meeting.
|
|
| THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH
| THE SPECIFICATIONS MADE HEREIN. THE SHARES REPRESENTED BY THIS PROXY
| WILL BE VOTED FOR PROPOSAL 1 AND 2 IF NO INSTRUCTIONS TO THE CONTRARY
| ARE INDICATED OR IF NO INSTRUCTION IS GIVEN.
|
| PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
| ENVELOPE.
|
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To change the address on your account, please |
check the box at right and indicate your new / / |
address in the address space above. Please |
note that changes to the registered name(s) |
on the account may not be submitted via |
this method. |
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Signature of Shareholder _______________________ Date: __________ Signature of Shareholder ________________________ Date: __________
NOTE: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When
signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized person.
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PROXY
ROCKWELL MEDICAL TECHNOLOGIES, INC.
BOARD OF DIRECTORS PROXY FOR ANNUAL MEETING MAY 26, 2005
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ROCKWELL MEDICAL TECHNOLOGIES, INC.
The undersigned hereby appoints Robert L. Chioini and Thomas E. Klema, and each
of them, attorneys and proxies with full power of substitution in each of them,
in the name, place and stead of the undersigned to vote as proxy all the Common
Shares, no par value per share, of the undersigned in Rockwell Medical
Technologies, Inc. (the "Company") which the undersigned is entitled to vote at
the Annual Meeting of Shareholders of the Company to be held on May 26, 2005,
and at any and all adjournments thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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