NOTE 14 – Stock-Based Compensation and Stock Repurchases

Former Executive Stock Based Compensation

As part of his compensation package, Mr. James J. Cotter, Sr., our now deceased former Chairman of the Board and Chief Executive Officer, was granted restricted Class A Non-voting Common Stock (“Class A Stock”) for 2014 and 2013. Mr. Cotter, Sr.’s stock compensation was granted fully vested with a five-year restriction on sale and the applicable compensation expense was recorded in the year of grant. The 2014 stock grants were issued in the first quarter of 2015. The table below summarizes the fair value on grant date recognized as compensation, the number of shares granted, and the fair value of stock per share for the years ended December 31, 2014 and 2013:


	Fair Value		Number of Shares		Fair Value Per Share
2014	$	1,200,000		160,643	$	7.47
2013		750,000		125,209		5.99

Employee and Director Stock Option Plan

The Company may grant stock options and other share-based payment awards of our Class A Stock to eligible employees, directors, and consultants under the 2010 Stock Incentive Plan (the “Plan”). The aggregate total number of shares of the Class A Nonvoting Common Stock authorized for issuance under the Plan is 1,250,000. As of December 31, 2016, we had 604,857 shares remaining for future issuances.

Since the adoption of the Plan in 2010, the Company has granted awards primarily in the form of stock options or stock grants. In the first quarter of 2016, the Company started to award restricted stock units (“RSUs”) to directors and certain members of management. Stock options are generally granted at exercise prices equal to the grant-date market prices and typically expire no later than five years from the grant date. In contrast to a stock option where the grantee buys the Company’s share at an exercise price determined on grant date, an RSU entitles the grantee to receive one share for every RSU based on a vesting plan. At the discretion of our Compensation and Stock Options Committee, the vesting period of stock options and RSUs ranges from zero to four years. At the time the options are exercised or RSUs vest, at the discretion of management, we will issue treasury shares or make a new issuance of shares to the option or RSU holder.

Stock Options

We estimate the grant-date fair value of our stock options using the Black-Scholes option-valuation model, which takes into account assumptions such as the dividend yield, the risk-free interest rate, the expected stock price volatility, and the expected life of the options. We expense the estimated grant-date fair values of options over the vesting period on a straight-line basis. Based on our historical experience and the relative market price to strike price of the options, we have not hereto estimated any forfeitures of vested or unvested options.

The weighted average assumptions used in the option-valuation model for the years 2016, 2015 and 2014 were as follows:


	2016		2015		2014
Stock option exercise price	$	$11.87	$	13.30	$	8.56
Risk-free interest rate		1.20%		2.23%		2.51%
Expected dividend yield		--		--		--
Expected option life in years		3.75		4.00		5.00
Expected volatility		25.01%		31.86%		31.33%
Weighted average fair value	$	2.49	$	3.82	$	2.76

We recorded compensation expense of $284,000, $282,000, and $146,000 for 2016, 2015, and 2014, respectively. At December 31, 2016, the total unrecognized estimated compensation cost related to non-vested stock options was $554,000 which is expected to be recognized over a weighted average vesting period of 1.95 years. Cash and other consideration received from option exercises during 2016, 2015, and 2014 totaled $142,000, $3.0 million and $978,000, respectively.

The following is a summary of the status of RDI’s outstanding stock options for the three years ended December 31, 2016:


	Outstanding Stock Options
	Number of Options		Weighted Average Exercise Price				Weighted Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
	Class A	Class B	Class A		Class B		Class A&B	Class A&B
Outstanding - January 1, 2014	709,850	185,100	$	6.66	$	9.90	4.70	$	938,503
Granted	80,000	--		8.56		--
Exercised	(157,600)	--		6.21		--		$	374,022
Expired	(64,000)	--		6.83		--
Outstanding - December 31, 2014	568,250	185,100	$	6.88	$	9.90	2.40	$	4,197,000
Granted	112,000	--		13.30		--
Exercised	(185,685)	(185,100)		6.09		9.90		$	327,170
Expired	(8,000)	--		6.23		--
Outstanding - December 31, 2015	486,565	--	$	8.68	$	--	2.89	$	2,188,011
Granted	169,327	--		11.87		--
Exercised	(46,815)	--		9.50		--		$	220,002
Expired	(74,000)	--		7.02		--
Outstanding - December 31, 2016	535,077	--	$	9.84	$	--	2.61	$	3,615,191

The following is a summary of the status of RDI’s vested and unvested stock options as of December 31, 2016, 2015 and 2014:


	Vested and Unvested Stock Options
	Number of Options		Weighted Average Exercise Price				Weighted Average Remaining Years of Contractual Life	Aggregate Intrinsic Value
	Class A	Class B	Class A			Class B	Class A&B	Class A&B
Vested
December 31, 2016	296,500	--	$	7.88	$	--	1.59	$	2,584,500
December 31, 2015	256,065	--		7.64		--	2.14		1,401,321
December 31, 2014	348,000	185,100		6.82		9.90	3.63		2,476,230
Unvested
December 31, 2016	238,577	--		12.28		--	3.87		1,030,691
December 31, 2015	230,500	--		9.83		--	3.72		786,690
December 31, 2014	220,250	--		6.98		--	4.25		1,720,770

Termination of Previous President’s Unvested Stock Options

Mr. James Cotter, Jr. has asserted in past communications with the Company that options to acquire 50,000 shares of Class A Stock, issued to him in connection with his retention as the President of our Company, survived his termination as President. On August 3, 2016, our Compensation and Stock Options Committee met, reviewed the issue and determined that such 50,000 options had in fact terminated with the termination of Mr. Cotter, Jr.’s employment as President. Accordingly, these options are not, and have not been outstanding since the effective date of Mr. Cotter, Jr’s termination. This was recorded as a forfeiture during the quarter ended September 30, 2016.

Restricted Stock Units

We estimate the grant-date fair values of our RSUs using the Company’s stock price at grant-date and record such fair values as compensation expense over the vesting period on a straight-line basis. In March 2016 and April 2016, RSU awards of 62,528 units and 5,625 units, respectively, were granted to both our directors and certain members of management. These RSU awards aggregating to 68,153 units remained unvested as of September 30, 2016. These RSU awards vest 25% at the end of each year for 4 years (in the case of members of management) and vest 100% at the end of one year (in the case of directors). During the year ended December 31, 2016, we recognized compensation expense of $419,000. The total unrecognized compensation expense related to these unvested RSUs was $396,000 as of December 31, 2016.

Common Stock Repurchases

On May 16, 2014, the Company's Board of Directors authorized management, at its discretion, to spend up to an aggregate of $10.0 million to acquire shares of the Company’s common stock. This approved stock repurchase plan supersedes and effectively cancels the program that was approved by the Board of Directors on May 14, 2004, which allowed management to purchase up to 350,000 shares of the Company’s common stock. As of December 31, 2016, we have fully spent the $10.0 million budget. Actual disbursements include transaction costs (such as brokers’ fees).

The Company repurchased its common stock as follows:


	Shares Acquired	Share Price		Total Paid (in thousands)
2016	181,739	$	15.68	$	2,850
2015	240,102	$	12.95	$	3,110
2014	432,252		9.42		4,070
Total	854,093	$	11.74	$	10,030