Blue Pattern

Legal

Thanks for getting this far!  We try to write our contracts in standard english to avoid confusion.  This preamble introduces the terms we use and illustrates the legal relationship Databased Finance has with our community of sellers. It doesn't replace the final contract signed, but is a shorter form introduction.

An Introduction of Terms for Sellers.

Databased Finance of Amazon sellers Fulfilled-by-Amazon inventory. 

1.  The Parties

1.1. The Buyer

1.2. The Seller

2. The Arrangement between the Buyer and Seller

3. The Operating  Agreement Between Buyer and Seller (the Operating Agreement)

3.1 The Purchase Agreement

3.2 An authority (the Authority)

3.3 A model form of fee note or invoice (Fee Note)

4. The Oracle Services Agreement (the OSA)

5. Operating Procedures

6. Seller’s Objection to the Fee and the Sell Down Procedure

7. Default Provisions

8. Seller’s Actions which Invoke the Default Provisions

9. Buyer’s Right to Choose to Terminate

10. Sales Authority Obligations

 

1.  The Parties

 

 

1.1. The Buyer 


The Buyer (Databased Finance Limited) has funds available to it on which it wishes to gain a return through purchase of inventory held by Amazon Sales Platforms (ASPs) fulfilment or similar services. It’s business model is to provide finance to online sellers of products on ASPs (the Seller(s))  by purchasing the Seller’s inventory (the Inventory) upon delivery to the Seller’s ASP  for a price (the Consideration) and to charge a fee for periods each of 30 days duration calculated at a rate per day (the Fee) which is related to the Consideration . For so long as the Inventory is valued at the same or a value greater than the Consideration, the Fee charged to the  Seller remains the same. If the value of the Inventory reduces, and with it the value of the security of the Buyer, the Fee is increased to reflect the reduced value of the security held by the Buyer.

 

1.2. The Seller


The Seller is in the business of marketing and selling products online at ASPs. Typically it’s cost of Inventory is 30% to 50% of the gross sales revenues from sales of the Inventory. The Seller needs finance to purchase and replenish Inventory prior to its sale.It aims to sell Inventory within a 90 day period of the Inventory being delivered to the Delivery Points of the Seller’s ASP. 

 

2. The Arrangement between the Buyer and Seller


The Buyer, as the new owner of the Inventory, authorises the Seller to market and sell the Inventory on the ASP for which the Seller has an account (the Seller’s ASP) under a Sales Authority given by the Buyer. The Seller is entitled to retain for its own account the gross sales revenues received from the sales of the Inventory (the Gross Revenues) whilst the Sales Authority is in force. In practice, the Gross Revenues  will comprise the gross sales revenues less Amazon fees, selling expenses deducted therefrom, and delivery charges and storage charges which are incurred either by Amazon or third party fulfilment centres. Items within the Inventory are continuously being sold and replaced with substitutes. From time to time the Seller may add a significant number of new items or products of the same brand as those within a portfolio or product line of branded items in the Inventory (Supplemental Inventory) The Supplemental Inventory forms part of the Inventory for the purposes of valuation and the Seller is required to comply with rules concerning the sale of the Supplemental Inventory to protect the Buyer’s security. The value of the Inventory varies from time to time  as selling prices adjust, products age or reach expiration dates or simply fail to sell.

 

The Data Based Oracle (DBO) is a business service which has the ability to verify inventory on ASPs, value an inventory at any one time and compile a valuation report for its customers for a fee (the Verification Fee). Reports from the DBO  enable the Buyer to receive confirmation that the Inventory (its security) is held at  the Seller’s ASP: is being offered for sale and a  valuation of  the Inventory at a given date. The Inventory valuation provided by the DBO enables the Buyer to adjust the Fee as appropriate. The Seller provides to the DBO access to the Seller’s  ASP so that the relevant data relating to  the inventory can be obtained.

 

 

3. The Operating  Agreement Between Buyer and Seller
(the Operating Agreement)


The Operating Agreement which sets out the terms governing the relationship between the Buyer and the Seller has appended to it :

 

3.1 The Purchase Agreement 


The Purchase Agreement sets out  the terms on which the Buyer will purchase the Inventory from the Seller.

These  terms include:

 

3.1.1 the Consideration and when it is to be paid to the Seller

3.1.2 the delivery points to which inventory is to be delivered (the Delivery Points) and dates for delivery of the Inventory

3.1.3  the description of the Inventory by product line and numbers

3.1.4  the price per item of the Inventory

3.1.5 warranties from the Seller that: 

- the Inventory is unencumbered and the Seller has the right to sell the Inventory,

- the Inventory is suitable for purpose, is of merchantable quality and fits its description,

 - there is no infringement of third party rights such as intellectual property rights

- an indemnity in respect of losses incurred due to third party claims relating to the Inventory

- insurance provisions and allocation of risk

- rights to reject non conforming items in the Inventory

- dispute resolution

- choice of law

 

3.2 An authority (the Authority) 


That is addressed to the Seller’s ASP signed by the Seller authorising the Seller’s ASP to deliver the Inventory held thereat as at the date of receipt of the Authority to the ASP account of an online seller designated by the Buyer. 

 

3.3 A model form of fee note or invoice (Fee Note) 


That sets out the terms relating to payment of the Fee and the Verification Fee, such as the date for payment, bank account details etc,

 

4. The Oracle Services Agreement (the OSA)


Under the OSA  the Buyer appoints the DBO to perform all of the services it  requires to be performed under the Operating Agreement such as verification and valuation, all performed by the DBO as an independent contractor The OSA includes the Verification Fee  payable by the Buyer for the  services and the format of the reports and Verification Fee Note which are to be delivered to both the Buyer and the Seller.

 

5. Operating Procedures


The billing and payment procedures under the Operating Agreement operate on a 30 calendar day cycle referred to as a Sales Cycle. The procedure begins as and from the Starting Date as defined in the Operating Agreement which is a date upon which the Inventory has been delivered to the Delivery Points of the Seller’s  ASP and is verified by the DBO. The period from the Starting Date to the 30th day of that month is the first of the Sales Cycles. Each Sales Cycle thereafter is a period of 30 days from the  end of the preceding Sales Cycle.

The DBO values the Inventory on the Start Date and the Inventory valuation at that date (the Starting Inventory Valuation) is used to determine the Fee for the first Sales Cycle . The Fee together with Verification Fee for the period  are  included together in the Monthly Fee Note which is invoiced to the Seller on the 5th day of the subsequent 30 day Sales Cycle period . The Seller pays the Fee to the Buyer and the Verification Fee to the DBO by the date stated therein. Interest is charged on any sums which are paid late or not at all and the sums outstanding are classified as Arrears.

Subsequently, the DBO values the Inventory on the date immediately preceding the expiry of the First Sales Cycle and if the value of the Inventory at that date is the same as the Starting inventory Valuation the Fee remains the same as for that for the First Sales Cycle calculated on the basis of an applicable daily rate. However, if the value of the inventory is less, the Buyer adjusts the Fee to reflect the reduction in the value of the Inventory and the corresponding reduction in the value of the Buyer’s security. The DBO will subsequently value the Inventory on the date immediately preceding the expiry of each Sales Cycle and the procedure for adjusting and charging the Fee is repeated for each Sales Cycle.

 

6. Seller’s Objection to the Fee and the Sell Down Procedure


The Seller has a period of five calendar days from the date of the Monthly Fee Note to object to the amount of the Fee. If a written notice of objection is received within the period a “ Sell Down Procedure” is invoked which operates over a period of 90 days from the giving of the notice.

Within the 90 day period the Sales Authority continues to operate and permits the Seller to sell down the Inventory on the Seller’s ASP. Within this period, the Seller is obliged to pay to the Buyer all the Gross Revenues until such time as the Buyer has received a sum equal to the  Consideration and any outstanding Arrears During the 90 day period  the process of Inventory valuation and the issue of Monthly Fee Notes for each Sales Cycle continues.

If during the 90 day period  the Buyer receives Gross Revenues from the Seller which are in total equal to or greater than the Consideration and there are no Arrears, the Sell Down Procedure is complete, the Sales Authority ceases and the Buyer and Seller have no further liability to each other under the Operating Agreement.

If at the end of the 90 day period  the Buyer has  not received Gross Revenues which are equal to or greater than the Consideration or there are Arrears the Sales Authority ceases, the Seller is in default and the “Default Provisions” apply unless the Buyer advises otherwise. 

 

7. Default Provisions


Under the Default Provisions the Buyer effectively exercises its ownership rights over the Inventory as its security and itself assumes the  responsibility of marketing and selling the Inventory in order to recover an the Consideration and any Arrears which are outstanding. To exercise its rights, the Buyer delivers the Authority  to the Seller’s ASP. The online seller designated to market and sell the Inventory on behalf of the Buyer then receives the Inventory and accounts to the Buyer for all Gross Revenues received by it. The Buyer is  entitled to retain for its own account the sums so received.There is the expectation that the Gross Revenues will be sufficient to enable the Buyer to recover sums equal to or greater than the Consideration and the Arrears.

 

(The Operating  Agreement could include alternate provisions dealing with the position at the end of the operation of the Default Provisions .One option could provide that the rights of the Buyer on default are limited to the sums recovered by the Buyer from the operation of  the Default Provisions In other words, the Buyer’s recourse is limited to the recovery of of value from the security, in which case, the Buyer and Seller have no further liability to each other at the end of the operation of the Default Provisions. In the alternative, the Operating Agreement could  provide that in the event  of the Gross Revenues being insufficient to enable the Buyer to recover an amount equal to the  Consideration  and the Arrears the shortfall is a debt due from the Buyer to the Seller. The two alternative provisions may be used to provide differing calculations for determining the Fee.)

 

8. Seller’s Actions which Invoke the Default Provisions


The Buyer is entitled to invoke the Default Provisions in certain defined circumstances. These principally include, circumstances which arise where the Buyer’s security is in jeopardy such as  termination of the Seller’s account with Amazon, the denial of access to the Inventory data, late or persistent late payment of the Fee and issues relating to Supplemental Inventory and order of selling items in the Inventory.

 

9. Buyer’s Right to Choose to Terminate  


The Buyer may decide, for whatever reason, that it wishes to effectively  bring the arrangements in the Operating Agreement to an end. Accordingly, the Buyer may elect to give written notice to the Seller that it wishes to sell the Inventory. If such a notice is given the Sell Down Provisions take effect on the same basis as if the Seller had given a notice of objection to the Fee. i.e If the Sales Authority is operable at the end of the 90 day period and the Buyer has not received Gross Revenues equal to the Consideration or there are Arrears the Default Provisions apply.

 

10. Sales Authority Obligations


At all times  when  the Sales Authority is in effect, the provisions relating to the valuation of Inventory for Sales Cycles and the calculation and invoicing of the Fee and the Verification Fee apply. 

 
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