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more issues to consider in a buy-sell agreement
November 14, 2018
more issues to consider in a buy-sell agreement 
    One of the more common provisions in the buy-sell agreement [asset purchase agreement, APA] is a "guarantee". The seller is required to guarantee that every account pay for at least one year.      Of course there are deals where there is no guarantee or a guarantee period that is less or more than 12 months. 
    Both seller and buyer need to be careful with the Guarantee Provision. A lack of understanding of how accounts are lost, issues that arise during the one year, and what communication is appropriate, will end up causing a dispute when the seller looks for the balance of the purchase price and the buyer claims that so many accounts were lost that the "hold-back" was depleted.  Worse, if not clear in the APA the buyer may demand that the seller pay more money on top of the depleted hold-back. That's OK if the seller understand that risk; it's not OK if the APA is written in such a way that the seller really didn't understand the risk.  Litigation is something that both seller and buyer, acting in good faith, should endeavor to avoid.
    A guarantee should not be unconditional. There should be conditions precedent that if not complied with void the guarantee for affected accounts. There are many conditions that the APA should include, a matter of negotiation for sure, and some of the more common are 1) buyer can't raise prices, 2) buyer can't change billing cycles, 3) buyer must continue to provide the services the seller provided, 4) buyer can't move accounts to a new monitoring center, 5) buyer has to provide satisfactory service, or poor performance cancels the guarantee, 6) buyer should employ the same invoicing and collection methods used by seller, 7) buyer should provide prompt notice of an account termination so seller can ascertain why the account canceled.  This list is not everything that needs to be considered, but a good start. If you're getting ready to sell or already engaged in negotiations and you feel you need to send this article along to your attorney [or other representative handling negotiations] then you've made the wrong choice. Your better choice is to call me or Jennifer Kirschenbaum, Esq at 516 747 6700 x 302 or 

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
516 747 6700