This Channel Partner Agreement (the “Agreement”) is entered into as of [Effective Date] (the “Effective Date”) between FractalWeb, LLC, a Texas limited liability company, with its principal place of business at [address] (“Fractal”), and [Partner legal name], [a ___ corporation], with its principal place of business at [address] (“Partner”). Fractal and Partner are each a “Party” and together the “Parties”.
Background
Fractal develops market segment applications on its Fractal Computing framework and makes them available to customers as a service, directly and through channel partners. Fractal encourages its channel partners to provide as many channel roles as fit their business, and compensates them for each one: the more roles and services a partner provides, the greater its portion of the revenue. Partner wishes to provide the channel roles and services selected in Schedule A, on the terms below.
1. Definitions
1.1 “Fractal Application” means each Fractal application named in Schedule A, including its later versions and releases.
1.2 “Customer” means an end customer that subscribes to a Fractal Application as a result of a Registered Opportunity.
1.3 “Registered Opportunity” means a prospective customer that Partner has registered, and Fractal has accepted, under Section 3.
1.4 “Channel Role” means one of the roles described in Schedule B: Referral, Sales Support, Reseller, Distributor (outside the United States only), System Integrator and OEM. “Channel Service” means one of the services listed under a Channel Role in Schedule B. “Elected Services” means the Channel Services marked as provided by Partner in Schedule A.
1.5 “Subscription Revenue” means the subscription fees for a Fractal Application that a Customer pays and that Fractal actually receives, less (a) taxes, duties and similar charges; (b) refunds, credits and chargebacks; and (c) amounts for hardware, third-party services and other pass-through costs.
1.6 “Contract Year” means each successive twelve-month period of a Customer’s subscription, starting on the date the subscription begins. “Year 1”, “Year 2” and “Year 3” are the first three Contract Years.
1.7 “Territory” and “Segments” mean the geographic territory and market segments stated in Schedule A.
2. Appointment
2.1 Fractal appoints Partner, and Partner accepts the appointment, as a non-exclusive channel partner for the Fractal Applications in the Segments and Territory, to provide the Elected Services. Fractal may appoint other channel partners and may sell directly anywhere, including in the Territory.
2.2 Partner may add or drop Elected Services by an updated Schedule A signed by both Parties. A change applies to Customers whose subscriptions begin after it takes effect, unless the updated Schedule A states otherwise.
2.3 The Distributor role is available only for a country outside the United States named in Schedule A.
2.4 Some Channel Services may also be provided for a Customer by another channel partner or by Fractal. Each Channel Service for a Customer is compensated once, to whoever provides it, as agreed in writing when the opportunity is registered.
3. Opportunity registration
3.1 Partner registers a prospective customer by giving Fractal, through Fractal’s partner portal or customer relationship management system or in writing, the prospect’s name, the decision-maker introduced, the Fractal Application of interest and the Channel Services Partner will provide for it.
3.2 Fractal will accept or decline a registration within ten business days. Fractal may decline a prospect that is already a Fractal customer, is already in active discussion with Fractal or another channel partner, or is outside the Segments or Territory.
3.3 An accepted registration lasts twelve months. If the prospect has not subscribed by then, the registration lapses unless Fractal extends it in writing because the sale is actively progressing.
4. Channel Services
4.1 Partner will provide each Elected Service for each Customer as described in Schedule B, competently, in good faith and in accordance with Fractal’s reasonable published partner program guidelines.
4.2 Services described in Schedule B as project specific (non-recurring engineering, hardware acquisition and maintenance, and data center and cloud vendor management) are provided under a statement of work for each project, typically scoped by Partner and agreed by both Parties, which sets their price and payment terms.
4.3 Where an Elected Service includes technical support, Partner will meet the response targets in Fractal’s partner program guidelines, and Fractal will provide escalation to its engineering team for issues Partner cannot resolve at its support level.
4.4 Partner will keep the Customer and opportunity records in Fractal’s customer relationship management system current for every Customer and Registered Opportunity for which it provides account management.
5. Fractal’s obligations
Fractal will: (a) provide the Fractal Applications to Customers under its subscription terms; (b) give Partner the product information, sales materials, demonstrations and training reasonably needed to provide the Elected Services; (c) give Partner access to its partner portal and customer relationship management system; (d) provide Level 2 and Level 3 engineering escalation to Partner as Section 4.3 describes; and (e) pay the compensation due under Section 6.
6. Compensation
6.1 Service compensation. For each Customer, Fractal will pay Partner, for each Elected Service that Partner provides for that Customer, the percentage of that Customer’s Subscription Revenue shown in Schedule B for the Contract Year in which the revenue is received. Compensation for different Channel Services is added together, so Partner’s total portion grows with each service it provides.
6.2 Contract Years. Schedule B sets the percentage for each of Year 1, Year 2 and Year 3. For Contract Years after Year 3, [the Year 3 percentages continue for as long as Partner provides the Elected Service / no service compensation is payable]. A Channel Service shown with no percentage for a Contract Year earns no compensation in that year.
6.3 Only while provided. Compensation for a recurring Channel Service is payable only for periods in which Partner actually provides it for the Customer. If Partner stops providing a Channel Service for a Customer, compensation for that service ends from that date, and Fractal may arrange for the service to be provided by others.
6.4 Paid as revenue is collected. Compensation accrues only when, and to the extent that, Fractal actually receives Subscription Revenue. Within 30 days after the end of each calendar quarter, Fractal will pay the compensation accrued in that quarter, with a statement showing, for each Customer, the Subscription Revenue received, the Contract Year, and the compensation for each Elected Service. No compensation is payable on amounts invoiced but not collected. If Subscription Revenue on which compensation was paid is later refunded or credited, Fractal may deduct the corresponding compensation from later payments.
6.5 Project services. Project specific services under Section 4.2 are paid as their statement of work provides, and are in addition to the compensation under Section 6.1.
6.6 Taxes and expenses. Each Party bears its own costs of performing this Agreement, unless a statement of work provides otherwise. Each Party is responsible for its own taxes on income. Fractal may withhold taxes required by law from payments, and will provide receipts for amounts withheld.
6.7 Records and audit. Fractal will keep accurate records of Subscription Revenue and compensation for at least three years after the quarter they relate to. Once in any twelve-month period, on 30 days’ written notice, Partner may have an independent accountant, bound by confidentiality, review those records during normal business hours to verify its compensation. If the review shows an underpayment, Fractal will pay it promptly; if the underpayment exceeds five percent for the period reviewed, Fractal will also pay the reasonable cost of the review.
7. Customers and pricing
7.1 Fractal sets the list prices of the Fractal Applications. Unless Schedule A states otherwise, each Customer subscribes under Fractal’s subscription agreement, and Fractal invoices the Customer and collects the Subscription Revenue.
7.2 Partner will not make any commitment, representation or warranty about a Fractal Application, its price or its performance on Fractal’s behalf, except as stated in Fractal’s current published materials or approved by Fractal in writing. Measured results are to be described as Fractal describes them, as results measured in deployments, not as guarantees.
8. Enhancements and intellectual property
8.1 Fractal retains all right, title and interest in the Fractal Computing framework and the Fractal Applications. Partner obtains no rights in them except as this Agreement expressly grants.
8.2 Customer specific configuration, data import definitions, features and other enhancements that Partner creates for a Fractal Application (“Enhancements”) are owned by Fractal, and Partner assigns them to Fractal on creation. Partner will coordinate with Fractal’s engineering team to transfer Enhancements, where appropriate, into Fractal’s market segment libraries for reuse. Fractal grants Partner a license to use Enhancements to provide its Elected Services during the Term.
8.3 Partner retains its own pre-existing tools, methods and know-how, and grants Fractal a non-exclusive, perpetual license to use any of them that are incorporated in an Enhancement, as part of that Enhancement.
9. Trademarks and the “Fractal Enabled” program
9.1 Fractal grants Partner a non-exclusive, non-transferable license during the Term to use Fractal’s names, logos and the “Fractal Enabled” mark solely to market the Fractal Applications in the Segments and Territory, in accordance with Fractal’s trademark guidelines. All goodwill from that use belongs to Fractal.
9.2 Where Partner elects a “Fractal Enabled” marketing, advertising and PR program service, Partner will run an ongoing customer-facing program and share its plan and results with Fractal each quarter.
10. Customer data and confidentiality
10.1 Each Party will protect the other’s Confidential Information under the Mutual Non-Disclosure Agreement between the Parties dated [date], which is incorporated in this Agreement and continues to apply for the Term and afterward as it provides. Compensation statements and the terms of this Agreement are Confidential Information.
10.2 Partner may access Customer data only as needed to provide its Elected Services, and only under the Customer’s agreement and the data protection terms Fractal requires. Where a Customer is in a regulated market segment (for example healthcare or government), Partner will sign any further agreement the law requires (for example a business associate agreement) before it receives regulated data.
11. Compliance
Each Party will comply with all laws that apply to its performance of this Agreement, including anti-bribery and anti-corruption laws, export control and sanctions laws, and privacy and data protection laws. Partner will not offer or give anything of value to any person to improperly obtain or keep business for a Fractal Application.
12. Warranties and liability
12.1 Each Party warrants that it has the authority to enter into and perform this Agreement, and that it will perform it in a professional manner. Except as expressly stated in this Agreement, neither Party makes any other warranty, express or implied.
12.2 Partner will defend and indemnify Fractal against third-party claims arising from Partner’s breach of Section 7.2 or Section 11, or from Partner’s negligence or wilful misconduct in providing its Elected Services. Fractal will defend and indemnify Partner against third-party claims that a Fractal Application, as provided by Fractal, infringes that third party’s intellectual property rights.
12.3 Neither Party is liable to the other for any indirect, incidental, special, consequential or punitive damages, or for lost profits or revenue, however caused. Each Party’s total liability arising from this Agreement is limited to the compensation paid or payable to Partner in the twelve months before the event giving rise to the liability. These limits do not apply to indemnification obligations, breach of Section 10, infringement or misappropriation of the other Party’s intellectual property, or Fractal’s obligation to pay compensation due.
13. Term and termination
13.1 Term. This Agreement begins on the Effective Date and continues for [three (3)] years. It then renews automatically for successive one-year terms unless either Party gives written notice of non-renewal at least 90 days before the end of the then-current term (together, the “Term”).
13.2 Termination. Either Party may terminate this Agreement for convenience on 90 days’ written notice, or by written notice if the other Party materially breaches it and does not cure the breach within 30 days after receiving written notice describing it.
13.3 Compensation after termination. After expiry or termination (other than Fractal’s termination for Partner’s uncured breach), Partner remains entitled to compensation under Section 6 for each Customer whose subscription began before the end of the Term, for each Elected Service Partner continues to provide for that Customer, through the end of that Customer’s Year 3. Referral compensation for Year 1 remains payable whether or not Partner provides other services.
13.4 Effect. On expiry or termination, Partner will stop presenting itself as a Fractal channel partner (except for Customers it continues to serve under Section 13.3), stop using Fractal’s marks, and return or destroy Fractal’s Confidential Information. Accrued payment obligations, and Sections 6 (as Section 13.3 provides), 8, 10, 12, 13.3, 13.4 and 14, survive.
14. General
14.1 Governing law and venue. This Agreement is governed by the laws of the State of Texas, without regard to its conflict of laws rules. The state and federal courts located in Travis County, Texas have exclusive jurisdiction over any dispute arising from it, except that either Party may seek injunctive relief in any court of competent jurisdiction.
14.2 Relationship. The Parties are independent contractors. Nothing in this Agreement creates a partnership, joint venture, franchise, agency or employment relationship, and neither Party may bind the other.
14.3 Assignment. Neither Party may assign this Agreement without the other’s prior written consent, except to a successor to all or substantially all of its business or assets to which this Agreement relates, provided the successor agrees in writing to be bound by it.
14.4 Notices. Notices must be in writing and sent to the addresses above (or as a Party later designates in writing), by hand, by a recognized courier, or by email with confirmation of receipt.
14.5 Entire agreement; order of precedence. This Agreement, its Schedules, any statements of work under it and the Mutual Non-Disclosure Agreement referred to in Section 10.1 are the entire agreement of the Parties on their subject and supersede all prior understandings on it. If they conflict, the body of this Agreement prevails over a Schedule or statement of work, unless that document expressly states that it overrides a named Section. This Agreement may be amended or waived only in a writing signed by both Parties.
14.6 Severability; waiver. If any provision is held unenforceable, it will be enforced to the maximum extent permitted and the remaining provisions remain in effect. A failure or delay in enforcing any provision is not a waiver of it.
14.7 Counterparts and electronic signature. This Agreement may be signed in counterparts and by electronic signature, each of which is an original and all of which together are one agreement.
Signed by the Parties’ authorized representatives as of the Effective Date.
- Signature
- Name
- Title
- Date
- Signature
- Name
- Title
- Date
Schedule A: Appointment and Elected Services
| Fractal Applications | [names of the Fractal applications] |
| Segments | [market segments] |
| Territory | [countries or regions; for the Distributor role, the country outside the United States] |
| Customer contracting | [Fractal contracts with and invoices Customers / other arrangement] |
| Elected Services | Those marked ☒ in the “Provided” column of Schedule B |
Schedule B: Channel Roles, Channel Services and compensation
Percentages are of the Customer’s Subscription Revenue received in each Contract Year. Mark ☒ each Channel Service Partner will provide. A dash means no compensation in that year.
| Provided | Role | Channel Service | What Partner does | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| ☐ | Referral | Introduction and attendance of the first sales meeting | Refers Fractal to the decision-maker and makes the introductions, with no further participation | 2.5% | — | — |
| ☐ | Sales Support | Ongoing sales support to the close of sale | Takes an active part through the close of the transaction and of the contract | 2.5% | 2.5% | 1.25% |
| ☐ | Reseller | Ongoing account management after the sale | Continues as the account manager: takes the first support call and actively cultivates the relationship and incremental business; prospects for new business full-time; builds the territory with a regular cadence with management; meets regularly with installed customers; is responsible for all account management activities; keeps the CRM current | 2.5% | 2.5% | 1.25% |
| ☐ | Level 1 technical support | Takes all initial customer technical support calls and does the initial triage of technical issues | 7.5% | 7.5% | 7.5% | |
| ☐ | Distributor (outside the US) | Country management | Manages the country, with contributors providing the services above | 5% | 2.5% | 1.25% |
| ☐ | System Integrator | Non-recurring engineering: development and engineering services | Statement of work typically scoped by Partner and can be a significant revenue line for Partner | Project specific | ||
| ☐ | Hardware acquisition and maintenance | Procures hardware and handles logistics for distributed hardware deployment | Project specific | |||
| ☐ | Data center and cloud vendor management | Manages data center vendors on the Customer’s behalf, as needed | Project specific | |||
| ☐ | “Fractal Enabled” marketing, advertising and PR program | Runs ongoing customer-facing marketing, advertising and PR programs | 2% | 2% | 2% | |
| ☐ | Sales training (Partner’s internal program) | Runs a formal internal training program for its sales teams | 1% | 1% | 1% | |
| ☐ | Application configuration and deployment | Configures the application for the Customer; defines and implements the Customer’s data import | 4% | 2% | 1% | |
| ☐ | Ongoing application enhancement | Implements and supports Customer specific features; coordinates with Fractal engineering to transfer functionality, where appropriate, into Fractal’s market segment libraries for reuse; enhances and augments the application’s functionality; tunes its performance | 7.5% | 7.5% | 7.5% | |
| ☐ | Customer training (ongoing) | Provides all initial and recurring Customer training | 4% | 2% | 1% | |
| ☐ | Level 2 support | Follow-up problem resolution, which may require access to engineering and development teams | 7.5% | 7.5% | 7.5% | |
| ☐ | OEM | “Fractal Enabled” marketing, advertising and PR program | Runs ongoing customer-facing marketing, advertising and PR programs | 2% | 2% | 2% |
| ☐ | Level 3 support | Follow-up problem resolution, which may require access to engineering and development teams | 5% | 5% | 5% | |
Schedule C: Example
For illustration only. A Customer subscribes for $1,000,000 a year, and Partner provides every Channel Service in Schedule B except the Distributor role, hardware acquisition and maintenance, and data center and cloud vendor management.
| Role | Channel Service | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|
| Referral | Introduction and first sales meeting | $25,000 | $0 | $0 |
| Sales Support | Ongoing sales support to close | $25,000 | $25,000 | $12,500 |
| Reseller | Account management | $25,000 | $25,000 | $12,500 |
| Level 1 technical support | $75,000 | $75,000 | $75,000 | |
| System Integrator | Non-recurring engineering: development and engineering services | Project specific: paid to Partner under its statement of work, in addition to the amounts below | ||
| “Fractal Enabled” marketing program | $20,000 | $20,000 | $20,000 | |
| Sales training | $10,000 | $10,000 | $10,000 | |
| Application configuration and deployment | $40,000 | $20,000 | $10,000 | |
| Ongoing application enhancement | $75,000 | $75,000 | $75,000 | |
| Customer training | $40,000 | $20,000 | $10,000 | |
| Level 2 support | $75,000 | $75,000 | $75,000 | |
| OEM | “Fractal Enabled” marketing program | $20,000 | $20,000 | $20,000 |
| Level 3 support | $50,000 | $50,000 | $50,000 | |
| Total compensation | $480,000 | $415,000 | $370,000 | |
| Share of the Customer’s subscription | 48% | 41.5% | 37% | |
Non-recurring engineering can be a significant revenue line for Partner. A System Integrator’s development and engineering services for a Customer are scoped, typically by Partner, in a statement of work and paid to Partner under it. That revenue is not part of the totals above and does not reduce Partner’s share of the subscription.