Guidance

"Events of default are typically established between the parties and memorialized in the security agreement. Events of default could include, but are not limited to:

- Payment-related default

- Performance-related default

- Failure to properly maintain (abandonment) or enforce (infringement) the IP rights"

Lanning G. Bryer and Scott J. Lebson, Intellectual Property Operations and Implementation in the 21st Century Corporation (via Google Books)

"For Bankruptcy Code section 365(n)(1)(A) to provide that the licensee is able to elect to treat the contract as terminated by the rejection, the rejection by the licensor must amount to such a breach as would entitle the licensee to treat the contract as terminated by virtue of its own terms, applicable non-bankruptcy law, or an agreement made by the licensee with another entity. Hence, to preserve the licensee's right to terminate the contract, the licensee should define the term "event of default" to include: (1) the licensor's rejection of contract under Bankruptcy Code section 365(n); (2) non-financial events of default that will survive the automatic stay; (3) the licensor's breach or failure to perform or observe any of its obligations, covenants, or agreements under the license agreement; and (4) specifically state the licensee's right to terminate the agreement as a remedy for these defaults."

Pouya Ziapour, Licensing Intellectual Property and Technology From Start-up Companies and Companies "At Risk" of Bankruptcy (2007).

About

  • Organization: Public
  • Updated: 09/06/2016
  • Rating

Overview

The Events of Default clause explicitly enumerates the situations that will constitute an "Event of Default" under the agreement. In general, the clause includes defaulting on any Notes or Loan agreements, violating any representations and warranties, and failing to perform obligations. Many clause examples also include a catchall term that includes any breach or other default of any other term in the Agreement.