RELATED PARTY TRANSACTIONS

The Company has entered into various transactions with related parties including the Estate of the Company’s founder and principal shareholder as of December 31, 2013 and former Chief Executive Officer ("former CEO"), Harry Kletter and an affiliated company, K&R. Because these entities have common ownership, our operating results or our financial position may be materially different from those that would have been obtained if the entities were autonomous.

During January 2014, Mr. Kletter passed away. K&R and Kletter Holding, LLC are now controlled by Orson Oliver, the executor of Mr. Kletter's estate.

On November 1, 2013, Mr. Kletter purchased 125.0 thousand shares of the Company's Common Stock from an affiliate of Blue Equity, LLC ("Blue Equity") in lieu of the Company's redemption of the shares, as contemplated in a Management Services Agreement by and between the Company and Blue Equity entered into on April 1, 2013 (the "Blue Equity Management Agreement"). The purchase price was equal to $4.00 per share, or $500.0 thousand in the aggregate, which were equal to the proceeds received by the Company from the original sale of these securities to Blue Equity. The closing price per share of the Company's Common Stock on the NASDAQ Capital Market on October 31, 2013 was $2.31. The Blue Equity Management Agreement was terminated effective July 31, 2013. As of December 31, 2013, Mr. Kletter beneficially owned approximately 1.8 million shares, or 25.9%, of the Company's issued and outstanding common stock.

In addition to serving as the Company's Chairman of the Board and interim CEO, Orson Oliver is also the executor of Mr. Kletter's estate and had previously received an Irrevocable Proxy from each of Mr. Kletter, K & R and the Harry Kletter Family Limited Partnership (collectively, “Kletter”), which provided Mr. Oliver and Sean Garber joint voting authority over the shares owned by Kletter (see Note 2 - "Management Services Agreement with Algar, Inc."). Mr. Oliver serves as general partner of the Harry Kletter Family Limited Partnership, a position he assumed following Mr. Kletter's death.

Except as noted below, all agreements between the Company and K&R are expected to remain in effect according to the terms of each agreement.

A summary of the Company's transactions involving K&R, in thousands, as of December 31, 2014 and 2013 is as follows:



	2014		2013
Balance sheet accounts:
Accounts receivable	$	32.2	$	13.4

Deposit payable to related party	$	500.0	$	500.0

Deposits (included in other long-term assets)	$	42.1	$	42.1

Accrued rent payable	$	577.7	$	30.0

Income statement activity:
Rent expense (property)	$	646.0	$	646.0

Lease expense (equipment)	$	126.0	$	126.0

Consulting fees	$	—	$	140.0

The Company leases its corporate offices, processing property and buildings in Louisville, Kentucky from K&R pursuant to the K&R lease. Deposits include one month of the original lease agreement’s rent in advance in the amount of $42.1 thousand. Effective January 1, 2013, the lease amount increased from $48.5 thousand to $53.8 thousand per month based on the CPI index as stated in the lease agreement. As of December 31, 2014, we recorded an accrual of $577.7 thousand for rent expense owed to K&R.

Under a Consulting Agreement, the Company engaged K&R as a consultant and retained the services of K&R management personnel to perform planning and consulting services with respect to the Company’s businesses, including the preparation of business plans, pro forma budgets, and assistance with general operational issues. The consulting fees were $240.0 thousand per annum, payable in equal monthly installments of $20.0 thousand. Mr. Kletter was compensated through these consulting fees. As of December 31, 2012, we extended this consulting agreement for one year according to the terms of the contract. In connection with Mr. Kletter's retirement from his positions of CEO and Director and the termination of the Blue Equity Management Agreement, the Consulting Agreement was terminated effective July 31, 2013.

Effective December 1, 2010, the Company and K&R entered into a lease agreement under which the Company leases equipment from K&R for a monthly payment of $5.5 thousand for five years.

Effective June 1, 2011, the Company and K&R entered into a lease agreement under which the Company leases equipment from K&R for a monthly payment of $5.0 thousand for five years.

On September 13, 2013, K&R made a $500.0 thousand refundable, non-interest bearing deposit with the Company related to K&R's potential purchase of a piece of the Company's real property located at 1565 East 4th Street in Seymour, Indiana. The Company was permitted and has used the deposited funds for general corporate purposes. The Company has been informed by K&R that K&R is no longer interested in acquiring the property, however the Company may repay K&R at a later date to be determined. For the period ended December 31, 2014, this deposit is included as a current liability entitled "Payable to related parties" for $500.0 thousand.

Other related-party transactions are as follows:

Board of Directors' fees and consulting fees:

As of December 31, 2014 and 2013, respectively, we had outstanding unpaid Board of Directors' fees of $70.0 thousand and $71.0 thousand. We expensed financial consulting fees of $25.0 thousand and $95.0 thousand during 2014 and 2013, respectively, to two of our directors.

Termination and Consulting Agreement with Brian Donaghy:

On June 11, 2013, Brian G. Donaghy notified the Company that, effective immediately, he was resigning from his position as the Company's President and Chief Operating Officer and all other positions he held with the Company, including principal executive officer.

On June 17, 2013, the Company and Mr. Donaghy entered into a Termination and Consulting Agreement (the “Consulting Agreement”) pursuant to which Mr. Donaghy provided consulting services to the Company with respect to the scrap metals industry with compensation at a monthly rate of $12.5 thousand. The Consulting Agreement terminated Mr. Donaghy's Amended and Restated Employment Agreement with the Company dated as of April 1, 2010. During the consulting period, the Company paid premiums for Mr. Donaghy's COBRA coverage to the extent of the amount of coverage premiums paid by the Company immediately before Mr. Donaghy's termination of employment. The Consulting Agreement was terminated effective December 16, 2013.

In connection with the Consulting Agreement, Mr. Donaghy granted the Company a full release of its obligations under his Amended and Restated Employment Agreement. The Company granted Mr. Donaghy a release of his non-competition obligations under that agreement, but the Consulting Agreement provides that Mr. Donaghy may not solicit Company employees to leave the Company during the consulting period and for two years thereafter and may not be employed by certain industry competitors during the consulting period.

Consulting Agreement with James K. Wiseman:

On October 29, 2013, James K. Wiseman notified the Company of his intent to retire as the Company’s Vice President and General Manager of Recycling and resign from all other positions he held with the Company and its subsidiaries. Mr. Oliver, interim Chief Executive Officer and interim President, became responsible for the day-to-day operations of the Company.

Because of Mr. Wiseman’s experience with the Company and in the scrap metal industry, on November 1, 2013, the Company and Mr. Wiseman entered into a Consulting Agreement (the “Wiseman Consulting Agreement”) pursuant to which Mr. Wiseman provided consulting services to the Company with respect to that industry with compensation at a monthly rate of $10.0 thousand. The Wiseman Consulting Agreement provided for the termination of Mr. Wiseman’s employment with the Company as the Vice President and General Manager of Recycling, a position he had initially held in accordance with an Executive Employment Agreement with the Company dated as of April 4, 2007.

The Wiseman Consulting Agreement terminated by its terms on November 1, 2014. During the consulting period, the Company paid premiums for Mr. Wiseman’s COBRA coverage to the extent of the amount of coverage premiums paid by the Company immediately before Mr. Wiseman’s termination of employment.

In connection with the Wiseman Consulting Agreement, Mr. Wiseman granted the Company a release of its obligations to pay any salary and welfare plan benefits under his Executive Employment Agreement. The Company granted Mr. Wiseman a release of his non-competition obligations under that agreement, but the Wiseman Consulting Agreement provided that Mr. Wiseman may not solicit Company employees to leave the Company during the consulting period and for two years thereafter.

Management Services Agreement with Algar, Inc.:

On December 2, 2013, the Company and Algar entered into the Management Agreement. Under the Management Agreement, Algar provides 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.

Under the 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 adjusted pre-tax income (as defined) during the term. Subject to shareholder approval and restrictions on exercisability set forth in the Stock Option Agreement (as defined), 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. At the annual meeting of shareholders of the Company on October 15, 2014, shareholders approved the issuance of these options. During the year ended December 31, 2014, we accrued a bonus payable to Algar in the amount of $549.0 thousand per the Management Agreement. We expect this amount to be paid during 2015.

On December 2, 2013, in connection with the Management Agreement, the Company’s board of directors appointed Sean Garber as President. Under the Management Agreement, the Company is required to reimburse Algar for the portion of Mr. Garber’s salary that is attributable to Algar’s services under the Management Agreement in an amount not to exceed $20.8 thousand per month, or $250.0 thousand per year plus other expenses.

As of December 31, 2014 and 2013, respectively, we expensed management fees to Algar of $250.0 thousand and $20.8 thousand for the portion of Mr. Garber's salary. As of December 31, 2014 and 2013, respectively, other management fees expensed for Algar in connection with the Management Agreement were $109.6 thousand and $5.1 thousand.

As of December 31, 2014, we had $57.6 thousand in accounts payable to Algar and $84.6 thousand in accounts receivable from Algar. We sold scrap material in the amount of $196.1 thousand to Algar in 2014.

See Note 2 - "Management Services Agreement with Algar, Inc." for additional details relating to the Management Agreement, the Stock Option Agreement and Mr. Garber's appointment as President.

Scrap material sales to Metal X, LLC:

During 2014, we sold scrap material in the amount of $1.7 million to MetalX, LLC. As of December 31, 2014, we had $250.3 thousand in accounts receivable from MetalX, LLC. For additional information regarding MetalX, LLC, see Note 15 - "Financing and Related Matters" to the Consolidated Financial Statements.