Software Escrow Frequently Asked Questions
We have answered the most frequently asked questions below. If you have any other questions, please get in touch with us.
New Clients
Existing Clients
New Clients
An escrow agreement is a contract among a depositor, a beneficiary, and an escrow agent. Typically, the escrow agent is asked to hold and dispose of certain deposit materials as part of a larger transaction between the depositor and beneficiary. Often, the escrow agreement will have release conditions that are contingent upon certain performance deliverables by the depositor and other obligations of the beneficiary.
A software escrow agreement is an escrow agreement that supports a software license agreement. In many cases, the escrow agent is asked to hold and dispose of software source code, build instructions and other proprietary information required by the beneficiary to support the licenses software if the depositor fails to meet their obligations of the license agreement.
Software-as-a-service escrow agreements are different from traditional software escrow agreements in that they often include many different and / or additional terms and conditions (i.e. credentials for the hosting provider to allow for takeover of the hosting environment, shorter release processes since down time in a SaaS environment is often immediate and can be permanent. Further, many SaaS escrow agreements include storage of the beneficiary’s data as well as periodic testing of hosting credentials to ensure that the beneficiary can leverage the escrow deposit materials to continue to use the SaaS application should the software vendor fail) because SaaS environments vary widely.
Any time a company is reliant upon proprietary technology for business critical functions, an escrow agreement should be considered to provide an action plan for continued functionality in the event of vendor failure. Virtually any technology, process, recipe, secret, or other element can be proven, documented, and stored for contingent release.
Expert escrow agents can successfully administer a wide range of escrow release conditions. The escrow agent should not be relied upon to prove or disprove the occurrence of release conditions, but rather they should administer their proven release process without prejudice. Escrow release conditions should be carefully negotiated as part of the overall agreement and associated escrow agreement.
Typical release conditions include:
Typical release conditions include:
- Bankruptcy of the depositor (i.e. Software vendor)
- Failure to meet support obligations of the license or services agreement.
- Total cessation of business.
- Acquisition by a competitor of beneficiary.
- Fee increases in excess of some previously negotiated cap.
- Sunsetting of a product Virtually any release condition can be administered by an experienced escrow agent provided that their process is clear and a dispute resolution process is clearly specified.
This is an often-negotiated component of the escrow. As a general rule of thumb, the beneficiary pays the escrow fees either directly or indirectly. It is also common for depositors to add a markup or administrative fees for their costs, efforts and risks associated with the escrow.
There are a few ways to handle this issue: The most common approach is to hire the escrow agent to test the materials held in their possession in a “simulated release” fashion to determine if all materials are present to support the technology without input from the depositor. This approach is the most independent method and removes risk for both the depositor and beneficiary. An alternative approach is for the beneficiary to witness preparation of the escrow deposit at the depositor’s location. This approach often omits much of the build up process as the depositor has the build environment functioning already.
The typical release process includes a written request for a release of the deposit materials and requires a sworn statement by an officer of the beneficiary confirming the limits on usage allowed under the license agreement. The length of the escrow release process can vary from a few days to 90 days depending upon the negotiated circumstances and importance of the technology.
Traditionally software and technology escrow deposits have been stored in media vault facilities designed for the protection and preservation of magnetic media. Increasingly escrow deposits and the associated user data are stored in an encrypted form on electronic vaults. This allows for significantly more frequent updates, easy redundancy and expedited release when needed.
The depositor and beneficiary are often at odds on this issue. Commonly depositors view a request or requirement for an escrow agreement as an insult or some form of distrust. Also, the escrow means extra work and risk for the depositor so they are often reluctant to agree to and fulfill the escrow. The beneficiary is simply trying to protect their business and their investment. As such, the escrow agreement should be negotiated in tandem with the larger agreement (i.e. Software license, SaaS agreement & etc.) and signed at the same time as the larger agreement. Once the larger agreement is signed, the beneficiary loses all leverage with regards to requiring the depositor to fulfill their escrow requirements. The signed escrow agreement is the first step on the continuum of escrow protection, but it Is critical because without the agreement in place the balance of the protections cannot be accessed.
Existing Clients
If your level of service includes Automated Escrow, you can request setup by completing this deposit materials form. Once you’ve completed the form, our team will reach out to schedule a call to establish Automated Escrow.
Go to the form >To add a standard beneficiary, please use this form.
To add a signature or certificate level beneficiary, please contact your PRAXIS representative.
To remove a beneficiary, simply have the Authorized Representative on your account email support@praxisescrow.com.
Once you’ve finalized your Escrow Agreement, you will receive an email providing you with next steps, which include submitting your deposit materials. To submit materials for the first time, please complete this deposit materials form.
If you are submitting physical deposit materials, you will receive an email with instructions for mailing your deposit after completing the deposit materials form.
If you are submitting materials via Automated Escrow or sFTP deposit, a PRAXIS representative will contact you with next steps after you’ve completed the deposit materials form.
To pay your invoice, simply click the link on the invoice email that says “Pay Invoice then follow the prompts to complete your payment via credit card, check or bank transfer.
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