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FIRE AGREEMENT - UCC OPTION
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Ken,
    I have an existing fire alarm customer who has been with us for over 10 years.  We are asking them to sign the new fire alarm contracts. [Commercial Fire All in One]
    He has a problem with...

SECURITY INTEREST/COLLATERAL: In order to secure all indebtedness or liability of Subscriber to GLOBAL, Subscriber hereby grants and conveys to GLOBAL a security interest in, and mortgages to GLOBAL all of Subscriber's equipment, inventory and proceeds thereof, accounts receivables and cash on hand. Subscriber agrees to allow GLOBAL to execute in Subscriber's name a UCC-1 statement.  

    Can this be stricken?  I honestly don't understand this paragraph.  We don't offer financing of systems if that is what this paragraph is about.
Thanks,
Greg
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ANSWER
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    You can omit this provision.  This provision presents a business judgment issue rather than a purely legal issue pertaining to protective provisions, which can also decide to change or omit but shouldn't.  The Security Interest provision turns you into a secured, rather than unsecured, creditor.  As a secured creditor you have the option of recovering the collateral.  You are not just limited to pursuing a money judgment. Also, if your subscriber filed bankruptcy you will have a claim against the collateral as a secured creditor.
    Admittedly the Security Interest provision is rarely used and if you started to file UCC-1s routinely against your subscribers you would cause an uproar because their credit scores would be affected and the filing may also violate other security agreements or leases they have signed.  
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PREPAYMENT - DO YOU OWE REFUND
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Ken,
    Regarding today's [July 15, 2015]  post from another gentleman, you answered the most important part of his question, but didn't address his second question.
    Upon expiration of the initial term we are (essentially) on a month-to-month basis and the customer can (without any financial repercussions) cancel at any time.  However, what if they are billed annually for their system monitoring?  Does their payment of a full year of services constitute their agreement that the contract has been extended for a full year?  And if it does not, and they cancel mid-year, are they legally entitled to a refund of the pre-payments? 
    Can you comment on it?
Thanks
Duane
All Island Security Inc
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ANSWER
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    I am going to answer in two ways.  In some states there is law on this issue and you are required to refund for pre paid future services.  In those states that do not have specific laws, I suggest you refund.  
    If your agreement is that your subscribers can terminate at will or on 30 days notice, or that the term is month to month, then invoicing for a longer period, in your case one year, does not change the term of the agreement.  You are invoicing for future services that both you and the subscriber agree can be canceled thereby relieving you of your duty to provide those services.  If you don't want to refund then provide that the term is consistent with the payment option, semi or annually, etc.  

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                                          Webinar Notice

We will be presenting a series of 4 webinars.  These interactive webinars will be presented live and there will be time alloted to questions and answers.  Noted alarm/security/fire expert Jeffrey Zwirn will present these webinars.  There is no chargefor the webinars and I suggest you register as soon as we post the dates.  Might be good time to pick up Jeff's comprehensive Alarm Science Manual: click here to get the book All webinars will be from 12 noon to 1 PM EST

REGISTER TODAY FOR ALL THE WEBINARS [register for each one separately]: 

July 21: Forensic Alarm Expert’s Perspective on Alarm Company Liability: Case Study and Ways To Help Minimize Your Liability
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July 28: Connect to Existing System Installed by Others: What Are Your Duties? & Ambush, Panic and Holdup Systems-The Customers Lifeline to Safety and Security or Not?
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July 30: Residential Fire Alarm Systems-Life Safety or Fatal Flaws
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August 4: Central and Remote Station Monitoring Instructions- Are your instructions safe or foreseeably dangerous?
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