Code Escrow Services…

The majority of Technology Escrow Agreements are established in order to resolve the ‘source code dilemma’.  Establishing a Technology Escrow Agreement provides the Licensee with access to the Technology Vendor’s source code and documentation, in the event that a specific, release/triggering event agreed upon by the Technology Vendor and Licensee occurs.

So, what are possible release/triggering events for Code Escrow?  The answer to this question depends on the events that the Licensee is concerned about.  Licensees are most concerned about events that will cause the Technology Vendor to fail to meets its warranty and maintenance obligations (e.g., insolvency, general assignment for benefit of creditors, wind-up or business liquidation); however, truth be told, there are numerous events that a Technology Vendor and Licensee can/may agree upon as valid release/triggering events for Code Escrow.

Most trusted, neutral third-party providers of Code Escrow Services can provide you with a template Agreement, thus saving you time and money associated with hiring an attorney to draft one for you.  Within the template Agreement, various samples of release/triggering events will be defined.  When establishing your Code Escrow Agreement, it is imperative that both the Technology Vendor and Licensee come to terms as to the specific release/triggering events that will govern the Code Escrow Agreement.

Sample release/triggering events follow:

A. The TECHNOLOGY VENDOR is unable to correct any Operational Defect (as such term is defined in the License Agreement) in the Program which prevents it from functioning in accordance with the applicable specifications, documentation, performance criteria and other warranties and descriptions provided in the License Agreement within sixty days after the BENEFICIARY has notified the TECHNOLOGY VENDOR of such failure, specifying in reasonable detail the respects in which the program fails to perform.

B. The TECHNOLOGY VENDOR is unable to discharge any of its maintenance obligations to the licensed Program in accordance with the warranties or other standards for such maintenance set forth in either the License Agreement or, if applicable, a written software maintenance agreement which may then be in effect between the TECHNOLOGY VENDOR and the BENEFICIARY within sixty days after the BENEFICIARY’S notice to the TECHNOLOGY VENDOR specifying in reasonable detail the respects in which the program is not being properly maintained.

C. The BENEFICIARY has reasonable cause to believe that any one of the following events will cause the TECHNOLOGY VENDOR to fail to meet its warranty and maintenance obligations:

(i) insolvency;

(ii) general assignment for benefit of creditors;

(iii) receiver appointment;

(iv) assets become subject to insolvency proceeding;

(v) wind-up or business liquidation; or

(vi) death of key programmers utilized by TECHNOLOGY VENDOR.

C.1 The BENEFICIARY has reasonable cause to believe that any one of the following events will cause the TECHNOLOGY VENDOR to fail to meet its warranty and maintenance obligations:

(i) bankruptcy;

(ii) bankruptcy proceeding; or

(iii) assets become subject to bankruptcy proceeding.

Summary

Most trusted, neutral-third party providers of Code Escrow Services can provide you with a template Agreement.  Within the template Agreement, various release/triggering events will be defined.  When establishing your Code Escrow Agreement, it is imperative that both the Technology Vendor and Licensee come to terms as to the specific release/triggering events that will govern the Escrow Agreement.

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National Software Escrow, Inc.
8225 Brecksville Road, Building Three, Suite #105 Brecksville, OH 44141
PHONE: (440) 546-9750 FAX: (440) 546-0207

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