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option on future contracts when selling subscriber accounts
December 1, 2017
option on future contracts when selling subscriber accounts
    Typically, when you're ready to sell your subscriber accounts, it's all of them, not a partial selection.  But there are deals where only part of the subscriber portfolio is offered for sale, or the seller is going to remain in business and continue to grow its RMR through new subscriber accounts.  What is the appropriate way to handle an account buyer's demand that it have an option to purchase some or all of your subscriber accounts in the future?
    Options connected with a present transaction is not all that uncommon.  Perhaps the most common option would be in the real estate lease, an option to extend the lease into a renewal term.  Others include an option to purchase your leased vehicle.  When you think about it, even the alarm contract has an option, the renewal term, whether month to month or a longer period, unless the auto renewal is terminated by affirmative notice to the other contracting party.
    Generally, there should be some consideration for the option.  It shouldn't be something demanded for which nothing is offered in exchange.  That consideration may be additional money, but usually it's just factored in when the overall purchase price is calculated.  But not always.
    Unless your deal includes a purchase price above market, and you think it's going to stay above market, you may want to resist the option.  Of course, you are gambling that the market for alarm RMR is not going to drop, though in that case the holder of the option is unlikely to exercise the option unless you agree to reduce the price to market.
    Agreeing to an option may alieve some anxiety and uncertainty because you have a built in potential buyer.  A better idea, if you're the selling, is to meet the demand for an option with your own demand for a "put".  That's the opposite of the option.  With the "put" you can require the buyer to purchase your additional alarm RMR.  The "put" evens out the "option" since now either side can initiate the purchase of the additional accounts.  To really save time and actually have a genuine "put or option" make sure all the terms of the purchase are set forth in the agreement.  If your agreement has any terms that come down to or close to "we will agree to mutual terms later" then you essentially have no agreement at all.  An "agreement to agree" is generally not enforceable, anywhere.  And if you're going to rely on "good faith efforts", don't, because that's only a great way to end up in litigation.  If you have a lawyer including "agree to agree" language in any contract, run, don't walk, to another lawyer.  If it's the other side to the contract demanding that kind of language let them know you weren't born yesterday.  Let them figure that out.
    Want to end up with an agreement that is not going to get you in trouble later, call our transactional attorneys at Kirschenbaum & Kirschenbaum.  Contact Jennifer Kirschenbaum,Esq at 516 747 6700 x 302 or to get started.  

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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