A software escrow agreement constitutes a legally binding arrangement encompassing a software developer (the depositor), a beneficiary (the borrower), and PRAXIS (a neutral third party). Under this arrangement, the depositor places source code, documentation, and potentially other relevant assets into escrow. In specific scenarios, like loan default, the beneficiary gains access to the escrowed assets. The inclusion of source code and documentation augments the collateral’s inherent value, empowering lenders to evaluate the software’s viability.
The source code forms the essence of any software or SaaS application, encapsulating intellectual property and the engineering endeavor invested in its creation. Within a software escrow agreement centered on technology as collateral, source code serves as collateral.
Complementing source code, comprehensive build documentation – encompassing architectural blueprints, flowcharts, and deployment guidelines – adds value to the collateral. It furnishes insights into the software’s framework, dependencies, and functionality. This documentation empowers lenders to gauge software intricacy, dependencies, and future maintenance prospects. In scenarios of default, lenders gain deeper insights into the software’s internal mechanics, expediting its ongoing development and maintenance.
In conjunction with source code and build documentation, instructive guidance delineates the step-by-step process to recreate the software environment and construct the application. These instructions ensure that a reasonably skilled software engineer can replicate the software using the escrowed assets.
Technical verification entails a comprehensive evaluation of the escrowed source code, documentation, and instructions to validate completeness and replicability. Proficient experts, often software engineers possessing domain expertise, conduct this verification. Through exhaustive material review, test builds, and software recreation, these experts affirm the deposit’s integrity. A successful technical verification offers lenders an assurance of the software’s reproducibility, further fortifying its collateral value. The technical verification report and screen capture videos of the build process serve as instructions for a beneficiary to rebuild the application following a release from escrow.
Software escrow agreements provide benefits for both borrowers and lenders. Borrowers access essential capital while retaining software ownership and control. Lenders, in turn, mitigate risk by possessing tangible collateral available for utilization or liquidation in the event of default. Technical verification furnishes an added layer of confidence to lenders, affirming the viability and value of the escrowed software.