Hullo Denis - many points here, ah ? Read on ..
>A client asked us to have access to the source code of our app they are using.
Escrow for small additional cost, or IMMEDIATE ON Release 1 delivery for premium. I'm not sure how your contract with that client reads, but if they are paying you for time and materials ? Source code is usually included in additional clause in contract.

>
>The thing is that this app is made for a vertical market. So there is no way that they'll get the source code right away.

SCHWING -> the project just went that a way. At issue here is the fact that now you have some knowledge about that vertical market, learned [for you] at the expense of client.

IF I WERE YOU - I would work up a partnership agreement with the client, that would cover:
1. all sales by your firm get the majority of the sales price, with a commission going to the base client [between 1 to 10 percent]. If you allow your client to sell this product, you should structure something where it becomes prohibitive for them to sell it - i e -
if they resell it, with no commission paid back to your firm, then they are required to handle their own technical support (not your firm). If they refer clients to you, OTOH, then they get a referral fee, and referred clients receive your standard technical support.

2. after 100 such sales by your firm, any updates and added features to the application will be given gratis to the base client.

3. vertical market knowledge gleaned during your time working on the project is something not to be bartered or sold back and forth during the life of the partnership. Your Client has Intellectual Property for their marketplace, YOU have Intellectual Property representing the codebase you produced.

>What would be the best thing to do for everyone is to make the source code available in case something happens to the company and that they end-up with nothing.

ESCROW SERVICES, but others have mentioned it here as well.
>That's the situation they want to avoid.
>
>Should they have to pay a premium because right now they pay for a fair amount considering that the app is also sold to other businesses.

I consider this to be seperate issues. They want to combine them and try to balance the source code product that your firm produced against any future sales projections. It's a bad position to be in. Extricate yourself from that position.

>If they get the source code then it's another thing because then the amount they paid (license) would'nt seem to be enough to get all the source code.

Huh ? there is source code, and there is 'all the source code'.
Not sure how you are delineating one vs the other - but in essence -
There is also some 'good faith' dollar amount that represents the transfer of their vertical market knowledge to your firm, and another 'good faith' dollar amount that represents the translating of that firms vertical market knowledge by your firm into source code. Balance that, and see which column has the greater amount, or the greater value. The client may be wanting to balance this by future sales projections ..

>Now what do you think would be the best deal for everyone?
1. Put the source code in escrow .
2. Make a new partnership agreement with the client for your company or another company (sales oriented) or the new partnership to handle sales of the new application. See my diatribe above on possible splits of sales dollar amounts.


But ? remember this much - you did not have anything in place for IP ownership and source code ownership in the contracts originally signed. Now you will be backpedalling to cover those bases, and you may lose out in some percentages or dollar amounts just to keep the door open for future sales (or not - depends on the original client and their acumen/availability to sell into a vertical market).

Just my thoughts - a small portion of what I would advise a sw dev client paying my consulting rates ...
mondo regards [Bill]