WHO SHOULD MAKE AN ESCROW AGREEMENT?

More and more Tier 1 firms rely on escrow agreements.

CLIENTS OF SOFTWARE PROVIDERS (licensees), use escrow solutions as part of their business continuity plan to protect themselves in case of:

  • bankruptcy of the software supplier
  • discontinuation of a specific software
  • supplier maintenance or support failure

Moreover, escrow solutions reduce vendor dependency, ensure internal and legal compliance in specific industries (banking, insurance, public institutions, suppliers, public or financial institutions, etc.) and limit risk exposure.

TECHNOLOGY BUYING COMPANIES enter into Escrow Agreements to mitigate supplier risk by securing access to plans, blueprints, blackbooks, etc. on critical technologies.

SOFTWARE PROVIDERS (licensors) enter into escrow agreements with their clients in order to:

  • gain leverage in negotiations by providing a solution in case of their failure or inability to maintain or support the product
  • enhance their credibility by anticipating situations and having solutions in place to weather exceptional circumstances
  • access RFP (tenders) or meet tender conditions by responding positively to, or anticipating requirements from, the buyer

LEGAL ADVISORS and PROCUREMENT departments often request escrow solutions in order to ensure business continuity, limit risk and dependencies and implement internal processes and policies.

WHAT IS AN ESCROW AGREEMENT?

The escrow agreement is the legal document that encapsulates the agreement between a technology supplier and their client to ensure business continuity in the event of failure of the supplier.

In practice, a technology supplier entrusts a third-party escrow agent, Vaultinum, with its digital assets (source code, database, black-book, user guide, technical documentation, passwords...) to secure a deal with a client (or investor or partner), allowing the client to have access to the agreed escrowed materials if specific conditions are met or a pre-defined event occurs.

When the specific conditions are met, or an event occurs (i.e. supplier’s failure to maintain the software, bankruptcy, change of ownership), Vaultinum will implement a strict verification and release process whereby the client would be provided access to the escrowed materials, enabling the client to continue its activities.

A software escrow agreement is possible even if the delivery method of the software varies (installed on client machines, SaaS, cloud based etc...).

The escrow agreement may take the form of a:

  • Simple access clause in the licensing contract between the vendor and client
  • Bi-partite agreement, with the vendor and client as the only signatories
  • Tri-partite agreement between the vendor, client, and escrow agent who provides more assurance of effective implementation
  • Quadripartite agreement betweeen the vendor, client, escrow agent, and distributor, hosting provider or other integrator company

WHY CHOOSE VAULTINUM?

OUR REPUTATION

Recognized as a trusted third party for over 40 years, Vaultinum has helped thousands of software firms across the world secure their business and implement sound business continuity plans.

OUR GUARANTEE

We are one of the rare platforms that can connect to the repository system of software providers, thus ensuring a streamlined and automated update of deposits and escrow elements.

OUR PLATFORM

Our unique platform provides a management tool for suppliers and their clients. Software suppliers can manage their different escrow agreements, affect renewals, update beneficiaries/clients, update the escrow elements to reflect bug fixes, security patches, new versions of the software or related documentation, and even delete items. On the other end, clients can view the escrow agreements, be alerted when renewals are upcoming, see the latest updates on escrowed materials and add new suppliers. Both software supplier and client have the possibility to initiate escrow agreements from their accounts.

OUR SERVICE

Since a standard deposit can be error-prone, Vaultinum offers different levels of verification of escrowed materials overseen by sworn expert agents and engineers. The deposited escrow elements will be verifed to ensure that they correspond to the declared list of elements deposited, that they function according to specifications, and that updates correspond to the latest releases or new versions.

ABILITY to ESCROW SaaS

Vaultinum can act as the trusted third party to secure and manage escrow access credentials and processes for SAAS.

INFRASTRUCTURE

With an ISO 27001 certified infrastructure and secure Swiss data-center redundancies, Vaultinum ensures maximum risk mitigation in order to provide 100% accessibility to the essential elements deposited in our Escrow vault.

OUR EXPERTISE

With a unique double expertise in Legal and IT, Vaultinum will help you design a customized escrow agreement in accordance with international standards.

HOW TO ENTER INTO AN ESCROW AGREEMENT?

Our escrow agents are available to help you throughout the process and to get you started, we have outlined the main steps below:

  1. Prepare the main elements of the escrow agreement: Escrow type (installed on client machines, SaaS, etc.), List of deposited materials (source code, documentation, database etc.), Frequency of updates (annual, upon new release, automated…), Type of Deposit/Level of verification (standard, verified), Triggering events (bankruptcy, change of ownership), Access and limitations (rights of use, full ownership, time limitation, etc.), Term of the escrow (number of years), Payment of escrow agent fees (this can be shared)
  2. Deposit the escrow materials into the escrow agent’s secured data center (or physically in exceptional circumstances).
  3. If the “Verified Deposit” option is chosen, Vaultinum will ensure that the materials depositied are the same as those agreed upon and that they function in accordance with specifications.
  4. Define the updating conditions
  5. Software code is subject to constant updates and changes. Vaultinum can ensure that the most up-to-date version is deposited by closing the source code via a direct connection to the SCM (Software Configuration Management) and archiving it securely.
  6. Release to licensee
  7. When the conditions for release are met, Vaultinum, upon request, will release the escrow elements after having confirmed, through a strict verification process, that the release conditions have in fact been met.

5 main reasons to make an escrow agreement:

From the Licensee’s perspective

Implement an effective business continuity plan. Some software may be critical to the operation of the licensee’s business while others may create disruptions if they become unavailable.

Ensure compliance with internal and regulatory rules (Banks, Insurance, etc..).

Avoid supplier dependency. A change of ownership may create issues and having an escrow in place mnimizes dependency risks.

From the licensor’s perspective

Obtain a competitive advantage and win more RFPs or tenders from potential buyers who are more and more demanding.

Reassure clients and secure deals by providing the benefit of access to source code and other essential elements in case of failure.

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