MANAGEMENT SERVICES AGREEMENT WITH ALGAR, INC.	9 Months Ended
Sep. 30, 2013
NEW MANAGEMENT SERVICES AGREEMENT 2013 [Abstract]
MANAGEMENT SERVICES AGREEMENT WITH ALGAR, INC.	MANAGEMENT SERVICES AGREEMENT WITH ALGAR, INC. On December 2, 2013, the Company and Algar, Inc. (“Algar”) entered into a Management Services Agreement (the “Algar Management Agreement”). Under the Algar Management Agreement, Algar will provide the Company with day-to-day senior executive level services. Algar will also provide business, financial, and organizational strategy and consulting services, as the Company’s board of directors may reasonably request from time to time. The Algar Management Agreement gives Algar the right to appoint the Company’s President and one additional executive officer of the Company. The Company is required to reimburse Algar on a monthly basis for its pre-approved expenses, as defined in the Algar Management Agreement, including expenses associated with the salaries of its executive appointees and employees. The Algar Management Agreement also provides that the Company’s board of directors will increase to up to seven members, giving Algar the right, subject to certain limitations, to cause the appointment of up to three members, one of whom will serve as Vice Chairman. Under the Algar Management Agreement, Algar will be paid a bonus in an amount equal to 10.0% of any year-over-year increase in the Company’s pre-tax income during the term, excluding any one-time, extraordinary or non-recurring income or expense items. The term of the Algar Management Agreement is effective December 1, 2013 and extends through December 31, 2016, subject to earlier termination upon mutual agreement or upon circumstances set forth in the agreement. Subject to shareholder approval and restrictions on exercisability set forth in a Stock Option Agreement entered into on December 2, 2013 between the Company and Algar (the “Stock Option Agreement”), the Company granted Algar an option to purchase a total of 1.5 million shares of Company common stock at an exercise price per share of $5.00. The first 375.0 thousand options vested and became exercisable on December 31, 2013. The second 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $6.00 per share or Company revenue following an acquisition increases by $30.0 million. The third 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $8.00 per share or Company revenue following an acquisition increases by $90.0 million. The fourth 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $9.00 per share or Company revenue following an acquisition increases by $120.0 million. Subject to the terms and conditions set forth in the Stock Option Agreement, including ratification of the issuance of the options by the Company’s shareholders at a special meeting, the options shall become exercisable on December 1, 2013; provided, however, the options shall become immediately exercisable for all 1.5 million option shares upon the first to occur of any of the following: (i) the termination of Algar's services under the Algar Management Agreement by the Company without cause; (ii) the termination of Algar's services under the Algar Management Agreement by Algar for good reason; or (iii) upon the occurrence of a change in control (with such vesting and expiration timed to give Algar the right to exercise the options immediately before the expiration triggered by the change in control). All rights of Algar will terminate with respect to the options and Algar will have no further rights under the Stock Option Agreement if (A) the Company's shareholders fail to ratify the issuance of the options to Algar at the Company's special meeting, (B) Algar's Services under the Algar Management Agreement are terminated by the Company for cause, by Algar without Good Reason, or the Algar Management Agreement is terminated automatically pursuant to Section 8(f) thereof. The options shall expire and be of no further force or effect on the earlier of (i) the closing of a change of control transaction, (ii) immediately upon termination of Algar's services under the Management Services Agreement by the Company for cause or by Algar without good reason, (iii) immediately if the issuance of the options is not ratified by the Company's shareholders at a special meeting, (iv) upon the expiration of the term of the Algar Management Agreement, or (v) three years after the date of the Stock Option Agreement. Sean Garber, Algar’s Chairman and Chief Executive Officer, formerly served as the Company’s President from 1997 to 2000. Mr. Garber is also Algar’s largest shareholder. Algar is located in Louisville, Kentucky and specializes in the procurement and sale of new and used auto parts as well as automotive and metal recycling. In connection with the Algar Management Agreement, Mr. Garber and Orson Oliver, the Company’s interim Chief Executive Officer and Chairman of the board of directors, have received an Irrevocable Proxy from each of Harry Kletter, K & R, LLC and the Harry Kletter Family Limited Partnership (collectively, “Kletter”), which provides Mr. Oliver and Mr. Garber joint voting authority over the shares owned by Kletter, approximately 25.7% of the Company’s issued and outstanding common stock. Messrs. Oliver and Garber have entered into a separate agreement in which, among other things, they agree to vote their proxies in favor of matters approved by the Company’s board of directors. Under the Algar Management Agreement, the Company and Algar have agreed to use their best efforts to effect a business combination between them as soon as is reasonably practicable. On December 2, 2013, in connection with the Algar Management Agreement, the Company’s board of directors appointed Sean Garber as President. Mr. Garber replaces Mr. Oliver who had been serving as interim President. Mr. Oliver will continue to serve as the Company’s Chairman and interim Chief Executive Officer. Under the Algar Management Agreement, the Company will reimburse Algar for the portion of Mr. Garber’s salary that is attributable to Algar’s services under the Algar Management Agreement in an amount not to exceed $20.8 thousand per month, or $250.0 thousand per year. The Company expects Algar to appoint Mr. Garber to the Company’s board of directors during the first quarter of 2014; Mr. Garber is expected to be appointed Vice Chairman at that time. Mr. Garber, age 47, has served as Algar’s Chief Executive Officer since 2005.

MANAGEMENT SERVICES AGREEMENT WITH ALGAR, INC.

On December 2, 2013, the Company and Algar, Inc. (“Algar”) entered into a Management Services Agreement (the “Algar Management Agreement”). Under the Algar Management Agreement, Algar will provide the Company with day-to-day senior executive level services. Algar will also provide business, financial, and organizational strategy and consulting services, as the Company’s board of directors may reasonably request from time to time.

The Algar Management Agreement gives Algar the right to appoint the Company’s President and one additional executive officer of the Company. The Company is required to reimburse Algar on a monthly basis for its pre-approved expenses, as defined in the Algar Management Agreement, including expenses associated with the salaries of its executive appointees and employees. The Algar Management Agreement also provides that the Company’s board of directors will increase to up to seven members, giving Algar the right, subject to certain limitations, to cause the appointment of up to three members, one of whom will serve as Vice Chairman. Under the Algar Management Agreement, Algar will be paid a bonus in an amount equal to 10.0% of any year-over-year increase in the Company’s pre-tax income during the term, excluding any one-time, extraordinary or non-recurring income or expense items. The term of the Algar Management Agreement is effective December 1, 2013 and extends through December 31, 2016, subject to earlier termination upon mutual agreement or upon circumstances set forth in the agreement.

Subject to shareholder approval and restrictions on exercisability set forth in a Stock Option Agreement entered into on December 2, 2013 between the Company and Algar (the “Stock Option Agreement”), the Company granted Algar an option to purchase a total of 1.5 million shares of Company common stock at an exercise price per share of $5.00. The first 375.0 thousand options vested and became exercisable on December 31, 2013. The second 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $6.00 per share or Company revenue following an acquisition increases by $30.0 million. The third 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $8.00 per share or Company revenue following an acquisition increases by $90.0 million. The fourth 375.0 thousand options vest and become exercisable only if and after the market price of our Common Stock reaches $9.00 per share or Company revenue following an acquisition increases by $120.0 million.

Subject to the terms and conditions set forth in the Stock Option Agreement, including ratification of the issuance of the options by the Company’s shareholders at a special meeting, the options shall become exercisable on December 1, 2013; provided, however, the options shall become immediately exercisable for all 1.5 million option shares upon the first to occur of any of the following: (i) the termination of Algar's services under the Algar Management Agreement by the Company without cause; (ii) the termination of Algar's services under the Algar Management Agreement by Algar for good reason; or (iii) upon the occurrence of a change in control (with such vesting and expiration timed to give Algar the right to exercise the options immediately before the expiration triggered by the change in control). All rights of Algar will terminate with respect to the options and Algar will have no further rights under the Stock Option Agreement if (A) the Company's shareholders fail to ratify the issuance of the options to Algar at the Company's special meeting, (B) Algar's Services under the Algar Management Agreement are terminated by the Company for cause, by Algar without Good Reason, or the Algar Management Agreement is terminated automatically pursuant to Section 8(f) thereof.

The options shall expire and be of no further force or effect on the earlier of (i) the closing of a change of control transaction, (ii) immediately upon termination of Algar's services under the Management Services Agreement by the Company for cause or by Algar without good reason, (iii) immediately if the issuance of the options is not ratified by the Company's shareholders at a special meeting, (iv) upon the expiration of the term of the Algar Management Agreement, or (v) three years after the date of the Stock Option Agreement.

Sean Garber, Algar’s Chairman and Chief Executive Officer, formerly served as the Company’s President from 1997 to 2000. Mr. Garber is also Algar’s largest shareholder. Algar is located in Louisville, Kentucky and specializes in the procurement and sale of new and used auto parts as well as automotive and metal recycling.

In connection with the Algar Management Agreement, Mr. Garber and Orson Oliver, the Company’s interim Chief Executive Officer and Chairman of the board of directors, have received an Irrevocable Proxy from each of Harry Kletter, K & R, LLC and the Harry Kletter Family Limited Partnership (collectively, “Kletter”), which provides Mr. Oliver and Mr. Garber joint voting authority over the shares owned by Kletter, approximately 25.7% of the Company’s issued and outstanding common stock. Messrs. Oliver and Garber have entered into a separate agreement in which, among other things, they agree to vote their proxies in favor of matters approved by the Company’s board of directors.

Under the Algar Management Agreement, the Company and Algar have agreed to use their best efforts to effect a business combination between them as soon as is reasonably practicable.

On December 2, 2013, in connection with the Algar Management Agreement, the Company’s board of directors appointed Sean Garber as President. Mr. Garber replaces Mr. Oliver who had been serving as interim President. Mr. Oliver will continue to serve as the Company’s Chairman and interim Chief Executive Officer.

Under the Algar Management Agreement, the Company will reimburse Algar for the portion of Mr. Garber’s salary that is attributable to Algar’s services under the Algar Management Agreement in an amount not to exceed $20.8 thousand per month, or $250.0 thousand per year. The Company expects Algar to appoint Mr. Garber to the Company’s board of directors during the first quarter of 2014; Mr. Garber is expected to be appointed Vice Chairman at that time.

Mr. Garber, age 47, has served as Algar’s Chief Executive Officer since 2005.