KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** ISC Final Schedule / Understanding the indemnity issues in the buy-sell deal March 25, 2023 ************************* If you're attending the ISC show next week I still have a few times available for private meetings and our group meetings may also have a few spots. Give Stacy Spector,Esq a call to schedule a time 516 747 6700 x 304 or email her at SSpector@Kirschenbaumesq.com. If you don't have time to schedule I'll be stopping by Rapid Response Monitoring's booth and COPS Monitoring booth, so stop by and say hello. *********************** Understanding the indemnity issues in the buy-sell deal *********************** When you sell, or buy, alarm accounts you can expect Indemnity issues and contractual provisions. Surprisingly these indemnity issues are not well understood by many attorneys involved in these transactions and most alarm company owners are even less familiar with the indemnity issues when it comes to these sale transactions. There are essentially four indemnity issues in the buy-sell transaction. Attrition Indemnity: Most of you [and attorneys you may engage for one reason or another] are familiar with the Attrition Indemnity. Most of you erroneously refer to it as the Hold Back. This indemnity is really a guarantee that the accounts you sell will still be accounts of the buyer after a period of time; to the extent they are not the seller has to reimburse the buyer for whatever the buyer paid [or agreed to pay] for the account that terminated during the guarantee period. The so called “hold back” is actually the part of the purchase price that is held back by the buyer, or placed into escrow] at time of closing and held until the end of the guarantee period. There are many variables that go into the Attrition Guarantee and if you don’t use an attorney very familiar with how to structure this provision you are going to hit or miss the customary provisions, assuming we can consider any provision customary as opposed to the culmination of intense negotiation. Trade and other debt indemnity: This is the most reasonable of the indemnity provisions because it is only fair that unless a seller has disclosed debt and the buyer has agreed to assume and pay that debt, the seller should be responsible for it. If the buyer ends up getting sued for that debt the seller should indemnify the buyer; that means defend the claim and pay the debt. As straight forward as this seems to be some attorneys have managed to complicate it with various scenarios. Representations and Warranties indemnity: This is a very risky provision. Some buy – sell agreements are worded with such legalize and every paragraph referencing at least one other paragraph, exhibit or schedule, it is sometimes a taunting task to figure out what reps and warranties have been made and what could possibly go wrong. The broader the rep and warranty is the greater the likelihood that a buyer will be able to make a claim under this indemnity. Seller should not expect any claim under this indemnity unless the seller knows that the reps and warranties in the buy – sell agreement were not accurate when made, or worse, didn’t know one way or the other if they were accurate and now it turns out they aren’t accurate. Good examples of this are “all systems are in working order”, or “all systems were installed per code or manufacturer specifications” or “all contracts are enforceable”. Typically an alarm owner has no idea if those are true statements unless it’s a one man operation and the owner knows every system and customer. Even then, the owner has no business warranting that every contract is enforceable because for sure the owner isn’t in a position to make that kind of legal conclusion. You need to be very careful with this indemnity provision. Claims by subscribers and third parties for loss: This indemnity provision is often lumped in with the Trade and other debt indemnity, and that’s a mistake. This indemnity involved legal and factual issues that are unique to this category. Too many attorneys don’t understand the difference between “occurrence” and “claims made” policies, and even if they do know the difference, they aren’t really sure how it pertains to the alarm industry and particularly the buy – sell agreement. I insist on two very clear and succinct provisions to deal with this category of indemnity in every buy – sell transaction I am involved with. In my experience this indemnity is best handled by two sentences, so if your buy – sell agreement doesn’t deal with it just as clearly then first, change attorneys, and second, fix the agreement [and it’s so important that you may have to change buyer or seller because this is a deal killer]. Want to know the details, come to the presentation on March 30 with Bart at 9:30 at ESA meeting room: Bassano Suite 2705 by convention floor. Not at ISC, then I suggest you hire K&K for your transaction. ********************* Schedule for Group Discussion Meetings at ISC [subject to dealer interest] Meetings are limited to 6 dealers. Contact Stacy Spector,Esq at 1 516 747 6700 x 304 or SSpector@Kirschenbaumesq.com to reserve a spot. Private meetings with Ken Kirschenbaum are still available – contact Stacy for appointment. All meetings scheduled at Palazzo Prestige Lounge unless otherwise noted. ********** Group Meeting Schedule: Note changes in schedule: Wednesday, March 29 at 10:00am-11:00am: Finance Group Discussion with Jim Wooster, Alarm Financial Services Wednesday, March 29 at 3:30pm-4:00pm: Meeting with Mitch Reitman, Employee Retention Credit and other tax issues
Thursday, March 30 at 9:30 - 10:30am at ESA meeting room: Bassano Suite 2705 by convention floor: Liability, insurance, horror stories, claims and other issues from perspective of Claims Administrator [Bart] and Alarm Defense Attorney [Ken]. Ken Kirschenbaum and Bart Didden. This promises to be entertaining and informative. You don't want to miss this. informative. All invited. No reservation needed Thursday, March 30 at 10:45 am -11:15 am: Central Station Group Meeting with COPS Monitoring at COPS booth Thursday, March 30 2023 at 11:30 am to 12pm Central Station Group meeting at Rapid Response Monitoring at Rapid Response booth Thursday, March 30 at 11:00am-11:45:Alarm Brokers Group meeting with Rory Russell, Acquisition & Funding Services Thursday, March 30 at 1:00pm-1:45pm: Contracts Group Meeting with Ken Kirschenbaum Fully Booked [call Stacy for private or meeting time] Thursday, March 30 at 2:00pm-2:45pm: Insurance E&O Group Meeting with Shawn Iverson, The Insurance Center Fully Booked Thursday, March 30 at 3:00pm-3:45pm: Sale or Purchase of Business Group Meeting with Ken KirschenbaumFully Booked [call Stacy for private or meeting time] ***** Private Meeting Schedule: Still a few open times for private meetings. Call Stacy 516 747 6700 x 304. Tuesday March 28 has open time ************************** STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ************************* THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily. https://www.kirschenbaumesq.com/page/alarm-exchange ************************* Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth ****************************** Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
