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
******************************
Last call if you want to do webinar before ISC / More on indemnity from the transactional attorney
February 26, 2025
*************************
Last day to sign up for the pre-ISC 2025 Webinar presentations
*************************
K&K will promote the webinars prior to ISC West 2025. Today is last day to let us know if you want to participate as a Presenter - call Kathleen Lampert today at 516 747 676700 x 319.
Time is tight so today is deadline if you want to participate. I know you haven't had a lot of time to consider it. If you are going to ISC [and even if you're not] here's your chance to reach thousands of prospective alarm dealers, acquaint them with your services and products and invite them to your booth or promotional invents at ISC.
*****
Pre- ISC: Webinars
Webinars by Central Stations. Plan would be for central station to focus on its unique qualities and evolving changes over the last year. Each webinar would be one hour, including some Q&A time. March 17 to March 28. Introduce yourself and encourage dealers to meet with you at your ISC booth. Call Kathleen to schedule: 516 747 6700 x 319.
*****
Webinars by Insurance brokers or business brokers; also one hour including Q&A, between March 10 and March 19.
*****
Webinars for Software Providers; same format between March 10 and March 21.
***************
Promotional opportunity available at ISC:
***
At ISC:
K&K will be scheduling Group meetings with Ken Kirschenbaum and others who want to lead a group meeting on topics to be announced, and private meetings [yes, free] with Ken at ISC, time permitting. Contact Kathleen to express interest and reserve your spots.
Time is limited so call Kathleen asap to express interest and book time slot. 516 747 6700 x 319.
*************************
More on indemnity from the transactional attorney
*************************
Ken
Insurance carriers fail, just like states. Look at Puerto Rico. Still need recommended industry standard contract terms / limits to indemnity, caps, baskets, and reasonable survival times, negotiated in.
Anon Transactional Attorney
****************************
Response
****************************
I ran yesterday's article on indemnity in alarm deals by a “transactional” attorney and received the above curt response; typical when I have to deal with a big shot or not so big shot attorney on an alarm buy-sell deal. I understand that there are commonly accepted provisions in buy-sell transactions that likely apply across many industries. I don’t profess to be a “man of all seasons” or the sharpest tack in the box; I’m just an old humble country lawyer that just happened to have stumbled his way up to the top of the ladder in the legal field representing the alarm industry. Some lawyers out there may have done as many alarm deals as I have, I just don’t know of any. So if there are any with, let’s say, 500 deals under their belt, feel free to chime in.
The issues raised by the transactional attorney above are, as I said, common in buy-sell deals, just not mine. For example, I am in agreement that a seller should be responsible for its own debts, certain debts, including taxes and trade debt. I am even OK with seller being responsible for warranty work claimed by customers after a sale; or a claim that seller didn’t complete an installation, maybe left out devices. I agree seller should indemnify a buyer from those claims [unless known and expressly assumed by the buyer]. The transactional attorneys demanding this indemnity almost always then offer a “basket” which is nothing more than a threshold number that must be reached before the indemnity kicks in. So seller ends up owing some taxes that the buyer has to end of paying, let’s say $35,000. Well the basket is $75,000, so the buyer will end up paying those seller taxes. Why? Because “that’s how it’s done in a transaction”. So if I’m representing the seller and the buyer’s transactional attorney wants that provision who am I to argue? But if I am the buyer’s lawyer I won’t be agreeing to that common provision.
Buyer wants representation that all systems are installed properly and working. This demand almost always includes a “personal” guarantee from the seller’s principal(s) too, apparently in recognition that when a claim eventually does arrive the seller corp will be stripped of assets and only the owner(s) will still be around. When the issue of insurance is raised why isn’t it acceptable for the buyer to say, “well what if my carrier goes out of business; or the claim exceeds my coverage”; why shouldn’t seller and its owners be responsible?
Because it’s the buyer who decided to 1) buy the accounts; 2) not check the accounts once it was the owner of those accounts; 3) decide on the carrier and 4) decides on the level of insurance coverage.
And do you think a transactional attorney knows anything about when someone can be sued; after how many years? They don’t. They understand [most of them] that there is a statute of limitations for most lawsuits. So they know a claimant has to sue within 3 years for negligence and 6 years for contract [periods can vary state to state]. An indemnity however can last a lot longer from the date of the closing because the time to sue on the indemnity may not begin until the buyer has lost the case and paid the damages, and that can be 10 or more years after a closing. Can you imagine a seller getting a call – or worse a summons – for indemnity after all those years?
This is a matter of assuming the risk. What is reasonable under the circumstances? Who decides what’s reasonable [other than the judge if there is a lawsuit] but the attorneys drafting the buy-sell agreement. When I deal with a transactional attorney it comes down to his judgement or what he thinks is common, as opposed to what I think.
My bottom line is that I follow the insurance. I also think it’s the buyer’s responsibility to take responsibility for the accounts once it owns the accounts. It’s up to the buyer if it wants to inspect every account. Sure, with thousands of accounts in a deal that may not be practical; but why would a buyer think it practical that a seller be responsible for a mistake made pre-closing that doesn’t end up with a loss until after the closing, sometimes years after the closing? Lawyers aren’t business people and they don’t understand how it works in the real world. Many alarm owners are unsophisticated when I it comes to buying accounts or selling accounts and they rely on their lawyer and tax advisors and other professionals, too often without realizing that these professionals may not have the skillset they should have or one day after many years of experience will have.
You’re the businessman, the owner; you get to make the right, or wrong, decisions.
One final thought. With all this dissention about a buy-sell agreement, is it worth the effort? That raises the argument of creating your own accounts through internal growth or growth by acquisition. Creation cost versus acquisition cost. I don’t know if times have changed or I have changed opinion, but alarm clients have convinced me that the cost of internal growth, with labor and material cost among other costs, it’s faster and more economical to buy accounts. Once you accept that you will have to accept the fact that you may have to pay more than you think you should, or in the case of a seller who has ignored all my advice, sell for a lot less than you’d like, but deals should work, or won’t, whether more or less is paid. The expectation when buying the accounts is not so precise because you’re not buying the balance of contract term only; you are not buying promissory notes that have fixed payments and come to an end. With alarm contracts there is no end, at least not until the fat lady sings. [In 1976, Texas Tech sports information director Ralph Carpenter said "the opera ain't over until the fat lady sings" during a basketball game. The phrase was later attributed to Dan Cook, a sportscaster from San Antonio, Texas. Cook used the phrase in 1978 after the first game between the San Antonio Spurs and the Washington Bullets during the NBA playoffs.]
***************************
STANDARD FORMS 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 ww.kirschenbaumesq.com/page/alarm-articles updated daily ********************
THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily
*************************
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 / Email 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. You can read articles and order alarm contracts on our web site www.alarmcontracts.com
**************************
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
|
