The vendor bankruptcy checklist: 7 contract clauses that protect you when your robot company folds

Two warehouse robot vendors left the market in two years. Attabotics filed for creditor protection in July 2025, days after Export Development Canada moved to enforce its security. It had just terminated 192 of 203 staff [5]. Customers with systems already installed included Gordon Food Service, Pan Pacific Pet and Modern Beauty [7]. The business was sold in September 2025 and the companies were then assigned into bankruptcy. The trustee expects nothing for unsecured creditors, against $48.2M of claims [5]. Zebra bought Fetch for $301M in 2021 and sold the business for $20M in 2026 [4]. If your vendor is next, the only thing protecting you is a contract you signed years ago.

Here are seven clauses worth putting in front of your legal team. Read them as a starting point for that conversation, not as advice. We are not lawyers, the summaries are simplified, and what applies to your deal depends on facts we do not know.

First, a warning about which country's law applies

The statutory points below are United States bankruptcy law. Attabotics filed in Canada, under the Bankruptcy and Insolvency Act [5]. Many robot vendors are foreign, so the rules governing an insolvency may not be the ones in your contract.

That cuts both ways, and it is worth knowing before you assume the worst. Canada has close equivalents to two of the clauses below. Its Act blocks a counterparty from terminating an agreement by reason only of the insolvency or the filing. It also preserves a licensee's right to use intellectual property despite a disclaimer, so long as that party keeps performing [8]. On one point Canadian law is clearly stronger. Since 2019 it preserves your right to use licensed intellectual property through a court-approved sale of the business [15]. US law has no equivalent. A US sale free and clear can be approved on any of five grounds, with no carve-out for licensees. Most failed vendors end in a sale rather than a liquidation. So that gap matters more than any clause you can draft. Ask your counsel which country's insolvency law would apply before relying on any of this.

The seven clauses

Why the termination clause is weaker than you think, and stronger too

Most technology contracts say the deal ends if the other side becomes insolvent. In a US bankruptcy that language stops working. But only from a specific moment. The Code blocks termination based on such a clause at any time after the case begins [1]. Before a filing, and outside bankruptcy altogether, the clause generally works under state law. So keep it. Just do not treat it as your plan.

Two things the rule also does. It has exceptions, including where other law excuses a party from accepting performance from a trustee, and contracts to lend money [1]. And it protects you in reverse: if your own company files, your vendor cannot terminate on you for that reason alone, subject to the same exceptions.

The license election, and what it does not buy

Say a bankrupt licensor rejects your software license. US law lets you elect to keep your rights for the rest of the term, provided you keep paying [2]. That is the strongest protection on this list. It is also narrower than it sounds.

The statute preserves your rights as they existed immediately before the case began, and expressly excludes any right to specific performance [2]. In plain terms: you keep the software you already had. No future versions, no bug fixes, no support calls. You must pay all royalties due, and you waive setoff [2]. So you pay full price for a frozen copy, and cannot deduct the value of the support that stopped. The election protects your ability to keep running today's code. It does not keep the vendor alive.

Two more limits. The provision applies where the debtor is a licensor, so a purely hosted service may fall outside it. It also keys payment to royalties, so a contract calling the same money a subscription fee invites an argument. Finally, the Code defines intellectual property as trade secrets, patents, patent applications, copyrighted works, plant varieties and mask works, each to the extent protected by other law. Trademarks are not on that list [3].

What the Supreme Court actually decided

In 2019 the Court held that rejecting a contract in bankruptcy is a breach, not a cancellation. Rights already granted survive [6]. The scope is worth getting right, because it is easy to state backwards. That case concerned a trademark license. It was decided under the general rule for rejected contracts, not under the license election above. The Court refused to read the special IP provisions as implying anything narrower. It said in terms that no negative inference arises, and placed trademark licenses alongside most other contracts under the general rule [6]. So the breach principle is broad. It is not a trademark workaround.

If you rent your robots, none of this covers the hardware

The license election protects intellectual property. It does not protect equipment. And the Code's protection for rejected leases, section 365(h), covers leases of real property only [14]. No part of section 365 protects a lessee of personal property when a bankrupt lessor rejects the lease.

So if you rent your fleet, the robots on your floor are the weakest thing you own. That is an argument for clause 7, for buying rather than renting where the deployment is critical, and for asking counsel what happens to your machines specifically, not just your software.

What escrow does and does not do

Source code escrow is the standard answer and it is worth having. The common drafting mistake is the release trigger. Say release is conditioned on the vendor's bankruptcy. That condition is itself an insolvency-triggered provision, and a trustee may argue it is unenforceable for the reason set out above [9]. Tie release to events you can prove instead: missed response times, a declared end of support, or failure to supply parts.

There is a way to strengthen escrow that most contracts miss. The license election extends to any agreement supplementary to the license, and it bars the trustee from interfering with your right to obtain the software from another entity [2]. Draft the escrow as supplementary to an express IP license and the escrow agent is that other entity. The legislative history says escrow was exactly what Congress had in mind [2]. This is not theoretical. A warehouse automation contract filed publicly with the SEC does exactly this. Symbotic's master agreement with GreenBox states that the source code escrow agreement is supplementary to the license within the meaning of section 365(n) [11]. It adds that the customer may fully exercise its rights and elections under the Code. The same contract refreshes the escrow deposit every three months, which is the other half of making escrow real. Look at how it drafts the trigger, too. A Chapter 11 filing alone does not release the code. The customer gets it only if the vendor actually stops supporting the system, if 180 days pass without the vendor assuming the support agreement, or if the contract is rejected [11]. That is a sophisticated buyer accepting that a filing by itself proves nothing.

Three more things escrow will not do for you. First, a court has already refused to release source code to a licensee. The fact pattern was almost this one: a Canadian debtor, recognised in a US court, a licensee asking under section 365(n). It lost because the contracts did not actually provide for it [16]. The judge's summary was that they were poorly drafted. Second, standard escrow forms let the depositor file contrary instructions, usually within ten business days. That freezes any release until a court orders otherwise [17]. Third, you can only obtain material that physically existed on the day of the filing [2]. A stale deposit is an empty one. That is why Symbotic's contract refreshes quarterly. Escrow still solves only half the problem. A warehouse robot is hardware, and source code will not build you a drive motor. Ask whether your escrow covers the bill of materials, the mechanical drawings and the named suppliers, and negotiate a minimum spares holding while the vendor is healthy.

The exit nobody drafts for

Vendors leave by being sold more often than by collapsing. Zebra did not go bankrupt. It paid $301M for Fetch in 2021. In late 2025 it decided to exit the business, and in March 2026 it sold to Skild AI for $20M of total consideration [4]. That is roughly a 93% write-down, and it is on the public record in Zebra's own filings. From a customer's chair the question is the same either way: who answers the phone next year, and what must they do? An acquirer buys assets and takes on only the duties it agrees to.

If you are prepaying, timing decides everything

Large robot orders often mean paying long before anything is installed. Until delivery, that half-built fleet is the vendor's work in progress. It is usually already pledged to the vendor's lender [12]. Asking for security over it is reasonable. Two things decide whether it is worth anything.

First, you will normally rank behind the lender who filed years earlier. So the practitioner answer is a subordination agreement, in which that lender steps behind you for the specific equipment [12]. A lien on its own is not enough. Second, and more important: take the security at the moment you pay. Security granted later, to cover money already handed over, counts as a transfer for an old debt. It can be undone if the vendor files within 90 days [13]. Taken at the same time as payment, it has a defence [13]. Same clause, same lawyer, different outcome depending on the date.

Worth knowing where the market lands. The Symbotic agreement above is a heavily negotiated deal between sophisticated parties. It takes no security interest at all, relying instead on escrow plus the section 365(n) stipulation [11]. Security depends on leverage, and most vendors have already pledged the assets.

The risk that runs the other way

Everything above assumes your vendor is the one in trouble. The largest documented loss in this sector is the opposite case, and it is worth ending on.

In November 2025 Kroger told the SEC it would close automated fulfillment centers and take impairment and related charges of about $2.6 billion, because the network was not meeting financial expectations [18]. Two weeks later it filed again to add one number: the charges included a cash payment to its vendor, Ocado, of about $350 million [18].

Read that carefully. The technology did not fail. The vendor did not fail. Kroger decided the business case no longer worked, and leaving cost it $350 million in cash on top of the write-off. So the contract that traps you is not only the one whose vendor dies. It is also the one you cannot afford to leave. Negotiate exit rights, exit assistance and a cap on exit costs in the same breath as the seven clauses above, because you are far more likely to use them.

Do the diligence before the contract

• Ask for audited financials, or an explanation of why you cannot have them.
• Ask who the secured lenders are. Attabotics filed after its largest secured creditor served notice to enforce [5], and secured creditors rank ahead of you.
• Prefer robot categories where several vendors are interchangeable, so switching is a commercial decision rather than a rebuild.
• Weigh the balance sheet as heavily as the demo [10].

What this is not

This is not legal advice, and we are not lawyers. It is a checklist for the conversation with the people who are. Each point is cited so your counsel can start there rather than from scratch. The summaries are simplified and statutes get amended. What applies to your deal depends on where your vendor is incorporated, what your contract says, and facts we do not know.

Sources

1. 11 U.S. Code section 365(e)(1): an executory contract of the debtor may not be terminated or modified 'at any time after the commencement of the case' solely because of a provision conditioned on the debtor's insolvency or on the commencement of the case. Section 365(e)(2) sets out exceptions, including where applicable law excuses the other party from accepting performance from the trustee and that party does not consent, and contracts to make a loan or extend financial accommodations. uscode.house.gov, title 11 section 365
2. 11 U.S. Code section 365(n): a licensee may elect to retain its rights under the contract and 'any agreement supplementary to such contract', to the intellectual property, 'as such rights existed immediately before the case commenced', but 'excluding any other right under applicable nonbankruptcy law to specific performance'. Section 365(n)(2) requires the licensee to make all royalty payments due and to waive setoff rights and claims under section 503(b). Sections 365(n)(3)(B) and (4)(B) bar the trustee from interfering with the licensee obtaining the intellectual property 'from another entity'. The Senate Report accompanying the 1988 amendment states the escrow agent was contemplated as such an entity, and that the licensee is protected in the intellectual property 'as it existed at the time of the filing'. S. Rep. No. 100-505 (1988). uscode.house.gov, title 11 section 365
3. 11 U.S. Code section 101(35A) defines intellectual property as trade secret; invention, process, design or plant protected under title 35; patent application; plant variety; work of authorship protected under title 17; or mask work, 'to the extent protected by applicable nonbankruptcy law'. Trademarks, service marks and trade names are not listed. uscode.house.gov, title 11 section 101
4. Zebra Technologies FY2021 Form 10-K: Fetch Robotics acquired August 9 2021 for total purchase consideration of $301 million, consisting of $290 million cash net of cash acquired plus $11 million for an existing minority interest. FY2025 Form 10-K, Note 9: in Q4 2025 the company decided to dispose of or exit the robotics automation business, incurring about $55 million of one-time costs. Q1 2026 Form 10-Q, Note 7: sale to Skild AI completed March 27 2026 for total consideration of $20 million ($9M cash, $9M investment, $2M indemnification escrow), net gain $5 million. Announced April 15 2026. sec.gov EDGAR, CIK 877212
5. Attabotics Inc. filed a Notice of Intention to Make a Proposal under subsection 50.4(1) of Canada's Bankruptcy and Insolvency Act on July 2 2025, with Richter Inc. as Licensed Insolvency Trustee (Calgary Court No. 25-095559). Export Development Canada, the single largest creditor, issued a Notice of Intention to Enforce Security on June 18 2025. The affidavit of Edna Conway sworn July 3 2025 states 192 of 203 employees were terminated on June 30 2025. The proceeding later converted to bankruptcy in October 2025. richter.ca/insolvencycase/attabotics-inc
6. Mission Product Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___ (2019), decided May 20 2019, 8-1, opinion by Justice Kagan: rejection of an executory contract 'has the same effect as a breach of that contract outside bankruptcy' and 'cannot rescind rights that the contract previously granted'. The Court expressly rejected the argument that sections 365(h), (i) and (n) support a negative inference, stating 'no negative inference arises', and held that trademark licenses fall 'along with most other contracts' within the general rule of section 365(g). supremecourt.gov, opinion 17-1657
7. First Report of the Proposal Trustee dated July 4 2025, Appendix E cash-flow forecast, distinguishes Attabotics customers with installed systems (Gordon Food Service, Pan Pacific Pet, Modern Beauty, and a US Marine Corps site) from contracted-but-not-installed systems (including Tesco). richter.ca/insolvencycase/attabotics-inc
8. Canada, Bankruptcy and Insolvency Act section 65.1(1): where a notice of intention or proposal has been filed, no person may terminate or amend an agreement by reason only of the insolvency or the filing. Section 65.11(7): where the debtor has granted a right to use intellectual property, a disclaimer does not affect the counterparty's right to use it for the term of the agreement, as long as that party continues to perform its obligations. Unlike US law, this is not narrowed by a definition excluding trademarks. laws-lois.justice.gc.ca, B-3
9. On the risk that a bankruptcy-triggered escrow release is itself an unenforceable insolvency provision: Raymond, source code escrow analysis, Pepperdine Journal of Business, Entrepreneurship and the Law, vol. 1, noting a trustee may assert that access to source code was not a right protected by section 365(n) because the trigger violates section 365(e). law.pepperdine.edu/jbel
10. Robot Eval, Which robot should you buy? A use-case guide for warehouse operators (this site), on treating vendor viability as part of the specification
11. GreenBox Systems LLC and Symbotic LLC, Master Services, License and Equipment Agreement dated July 23 2023, filed as Exhibit 10.3 with the SEC. Section 7.5 (Bankruptcy) states the source code escrow agreement is an 'agreement supplementary' to the agreement within the meaning of 11 U.S.C. 365(n), and that the customer may retain and fully exercise its rights and elections under the Code. Section 7.4 requires the deposit materials to be updated no less frequently than every three months. The document grants the customer no security interest; the phrase appears only in the definition of Lien. sec.gov EDGAR, CIK 1837240
12. On prepayment for customised equipment, the vendor's lender's prior blanket lien, and the use of a subordination agreement so the customer can move ahead of it for specific equipment: Conway, Olejniczak and Jerry S.C., Customized Equipment and the Risk of Prepayment, lcojlaw.com/legal-resources/customized-equipment-and-the-risk-of-prepayment
13. 11 U.S. Code section 547(b): a trustee may avoid a transfer made for or on account of an antecedent debt owed before the transfer, made while insolvent, on or within 90 days before the filing. Section 547(c)(1) provides a defence where the transfer was intended as, and was in fact, a substantially contemporaneous exchange for new value. law.cornell.edu/uscode/text/11/547
14. 11 U.S. Code section 365(h)(1)(A) applies where 'the trustee rejects an unexpired lease of real property'. No subsection of section 365 protects a lessee of personal property when a debtor-lessor rejects the lease. law.cornell.edu/uscode/text/11/365
15. Canada, Bankruptcy and Insolvency Act section 65.13(9): where the insolvent person is party to an agreement granting another party a right to use intellectual property included in an authorised sale or disposition, 'that sale or disposition does not affect the other party's right to use the intellectual property', so long as that party keeps performing. Parallel provisions: BIA sections 72.1 and 246.1, and CCAA section 36(8), all in force November 1 2019. By contrast 11 U.S. Code section 363(f) permits a sale free and clear of any interest on any of five grounds, with no carve-out for licensees. laws-lois.justice.gc.ca, B-3
16. In re Bluberi Gaming Technologies, Inc., 554 B.R. 841 (Bankr. N.D. Ill. 2016): a licensee sought source code from escrow under section 365(n)(4) in the Chapter 15 case of a Canadian debtor and failed. The court held that section 365(n)(4) 'requires a contractual provision upon which to rest, and there is no contractual provision here', and observed that the contracts in question were poorly drafted. govinfo.gov
17. The Kroger Co., Form 8-K filed November 18 2025, Item 2.06 Material Impairments: on closing certain US fulfillment centers, expected impairment and related charges in Q3 fiscal 2025 of approximately $2.6 billion, 'as a result of these closures and the rest of the automated fulfillment network not meeting financial expectations'. Form 8-K/A filed December 5 2025, filed solely to add that the charges include 'a cash payment to Ocado of approximately $350 million'. sec.gov EDGAR, CIK 56873
18. Iron Mountain standard Three-Party Master Beneficiary Escrow Service Agreement, filed as an exhibit on SEC EDGAR: after a release request the depositor has ten business days to deliver contrary instructions, after which the agent continues to store the deposit without release pending joint instructions, dispute resolution, withdrawal, or an order from a court of competent jurisdiction. sec.gov EDGAR