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SW015. ESCROW AGREEMENT (Multi-Licensee - verification of Software Deposited)

The source code of a software program is the detailed specification or "blueprint" of its creation, operation and functionality and without which a software programmer cannot readily understand the software for the purposes of modification, enhancement, "debugging", support or indeed rectification of defects. The source code is not required for the normal commercial use of the program by an end-user.

The source code is therefore highly confidential and the owner of the copyright of the software will not wish to disclose the same to any end-user or distributor even though such parties have entered into an agreement or license with the software owner for use of the software.

However, if the software program is essential to an end-user or distributor's business, such end-user or distributor may require the software owner to arrange for the source code to be made available to them in the event that the software owner goes out of business or is in material breach of its obligations to support and maintain the software to a proper operational standard. Such an arrangement is now commonly made with an independent third party, an Escrow Agent, appointed by mutual agreement of both parties. The Escrow Agent is contracted by the parties to hold the source code until such time as the parties' agreement or license has expired or terminated or until the occurrence of certain specific events, usually the liquidation or material breach of the Software Owner, whereupon the Escrow Agent is authorized, upon certain conditions, specified in the Escrow Agreement, to release the source code to the end-user or distributor, as the case may be.

The purpose therefore of an Escrow Agreement is to provide for the terms of deposit of the source code and the conditions of its release to the end-user or its return to the Software Owner.

In addition, if the contract is drafted for the benefit of the registered licensees (as this contract is) this Agreement will require the Escrow Agent to verify or check that the source code which it is actually holding is indeed that which the registered licensees are using. The verification process is very important to the licensees to ensure that, in the event that the escrowed material is released (i.e. on the owner's liquidation or default), it will prove to be not only the correct software but also the version used by the licensees (see other website escrow contracts if no verification is required).

This contract is drafted between the Licensor and the Escrow Agent where the Licensor wants to deposit the source code in escrow for the benefit of all its licensees who wish to register to receive such benefit. This contract provides for verification of the source code.
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