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Altered contract now raising issue on sale of accounts / Register for Webinars now
February 12, 2022
Webinar Title:  what's new in the 2022 updated contracts
When:  February 15, 2022, at 12:00PM Eastern time
Topic Details: most important updates in the 2022 contracts
Presented by: Ken Kirschenbaum, Esq.  Kirschenbaum & Kirschenbaum
Who should attend:  Company owners, CEOs, Managers, sales personnel
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Webinar Title:  why use Disclaimer Notice and join Concierge Program
When:  February 16, 2022, at 12:00PM Eastern time
Topic Details: when, how and why to use Disclaimer Notice /  why you should join Concierge Program
Presented by: Ken Kirschenbaum, Esq.  Kirschenbaum & Kirschenbaum
Who should attend:  Company owners, CEOs, Managers, sales personnel
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Webinar Title:  common legal issues in buy-sell deals
When:  February 22, 2022, at 12:00PM Eastern time
Topic Details: common issues to consider in smaller buy-sell transactions
Presented by: Jesse Kirschenbaum, Esq.     Kirschenbaum & Kirschenbaum
Who should attend:  Company owners, CEOs, CFOs
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Webinar Title: issues buying or selling alarm company and broker's roll
When: February 24, 2022, at 12:00 PM Eastern time
Topic Details: How to prepare for negotiations and what to expect
Presented by: Ron Davis and Kelly Bond of Davis Mergers & Acquisitions Group
Who should attend: Company owners, CEOs, CFOs
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Altered contract now raising issue on sale of accounts   
            I have an interesting question that I'm sure your readers would also like to know the answer to. I recently was offered the accounts of another alarm company. When we did our review of the customer agreements we found one customer that only signed a one-year agreement and has been doing so for many years, so that is not the issue. Still, when we looked at the agreement we found that the customer crossed out almost all the protective provisions in the agreement. This is a K&K contracts, but year after year, all of the second page and most of the first page are crossed out, and the alarm company accepted the agreement.
            My question to you is what stand should I take with the alarm company selling the accounts, and what stand should I take with the customer?  Do you see this type of issue often?
            I don't understand how any alarm company would allow this to happen.
Name withheld
            There are several reasons for buying and using Kirschenbaum Contracts™ and they are related.  Because the contracts are tightly written with protective provisions they are also more valuable.  Your contracts are your primary asset and not all contracts are equal.  All other factors being equal a Kirschenbaum Contract™ should add 5 X multiple to your sale price when you sell your accounts.  Another way of saying it is that without a Kirschenbaum Contract™ you are very likely to get 5 X less multiple on your sale, or a buyer will be offering 5X less multiple.  So if the seller has everything else right, such as upgraded radios, own line into the central station, popular equipment, good customer mix with profitable pricing, but poorly written or no contracts, expect to lose 5 X multiple.  36 X quickly becomes 31 X.  Figure out the RMR and do the math; could be a lot of money and it's 13% if the selling multiple strike price is 36 times RMR.  By the way, that is the multiple I am seeing for Kirschenbaum Contracts™ when other factors are favorable.
            When you buy accounts you have to consider the liability risks.  The Standard Form Agreements are designed to provide the best and most comprehensive protection against claims available by contract.  That's why they are more valuable, especially if they are updated and current.  But an altered contract loses its advantage and value.  For one thing, poorly written, no contract or significantly modified contract won't be considered by many potential buyers, and for good reason, so the buyer "pool" is reduced, resulting in lower offers.  Secondly, there is certainly more risk when there isn't a proper contract with the customers.  Just one customer can bring your entire company to its knees if the loss is serious enough; serious enough to blow right passed your insurance coverage, exposing your company assets.  Yes, it can happen.
            You should reject the account.  Your agreement to purchase accounts, if it's handled by K&K, is going to require proper contracts that aren't modified in any material way.  The contract described above will not meet that criteria and will be excluded.  More than likely you won't be paying for that account, and if you can overcome your greed, you won't accept it for free.  I don't care how affable a customer is, you will find that a serious enough loss will turn any friendly customer into a menace and, most likely you'll be dealing with your friendly customer's insurance carrier, who won't be friendly.

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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