Untitled Document
Is Partnering A Trawler For You?
By John Melton
The following is the agreement we use within our partnership and has worked for the duration of our joint partnership in Incredible and now Mischief. It will give you an idea of the “legal speak” that we use to run our partnership as a business. This agreement can be a reference point for those of you considering similar partnership arrangments.
INCREDIBLE LLC AGREEMENT
This AGREEMENT made between John and Penny Melton of University Place, Chris and Kristina Wallington of Tacoma, and Derek and Debbie Keith of Fircrest.
WITNESSETH THAT:
WHEREAS J. & P. Melton, C & K Wallington, and D & D Keith are three parties each owning one-third interest (not including original equity owned by J & P Melton; see appendices B and C) in the yacht Mischief (the vessel), a 1968 32 Grand Banks (GB 32-70) diesel trawler, together with all appurtenances and equipment thereof, hereto and whereas the parties desire that the relationship between them relative to the ownership, maintenance, and operation of the vessel be governed by written agreement; and
WHEREAS these parties have created a Limited Libability Company regardng this vessel, know as Incredible LLC,
NOW, THEREFORE, the parties hereby agree as follows:
I. EXPENSES
A. The parties shall establish a checking account at a financial institution of their choosing, in the name of INCREDIBLE LLC, for the purpose of this agreement. A treasurer, elected annually by simple majority of the three parties, shall be responsible for collecting and depositing all income and monthly payments as well as making disbursements necessary under this agreement. This account will be supplemented monthly according to the schedule in Appendix A, as agreed upon by said parties.
B. Each party shall share in all maintenance and non-capital expenditures equally. Since the intention of the parties is equal financial representation, capital improvements will not change the representative fraction of any individual or group of individuals except by a unanimous written agreement involving the three parties.
C. The sums on deposit in said account shall be drawn upon to meet the expenses of maintenance and improvement of the vessel. Without limiting the foregoing, this shall include moorage fees, hull and equipment maintenance, repair and replacement, capital improvements, and each and every expenditure connected with the ownership of the vessel except that each party, while operating the vessel, shall bear the direct expense of such operation (i.e. fuel, docking, transient moorage charges, etc.).
D. Each party will forward his monthly payment to the treasurer by the 1st (first) day of every month. If by the 7th (seventh) day of the month no payment has been received, the treasurer will inform all parties of this deficiency and unanimously resolve (in writing) this deficiency. If unanimous resolution cannot be attained, the procedures outlined in the section entitled TERMINATION VALUATION will take precedence, with the deficient party (or parties) considered the seller(s). During this period of resolution of any financial deficiency, the treasurer shall act in such a way so as to protect the financial interest of all non-deficient parties.
E. No expenditures for maintenance or improvement shall be made except by majority agreement, except that any party may make minor purchases for maintenance purposes, not in excess of $50.00 per item, without the majority consent of the others. When communication with other parties is not practicable, any party may incur expenses for emergency repairs.
II. OPERATION
- On or about November 1 of each year, the partners shall meet in an annual meeting to set the annual schedule and discuss Incredible LLC business. The calendar showing the schedule for the upcoming year shall be distributed to each party by the treasurer. Any party may negotiate a partner-to-partner schedule change with any other party at any time.
- During the week beginning at 0001 hrs on any Tuesday and ending at 0001 hrs the following Tuesday, the governing party will have the right to sole use of the vessel. Should the party having the right to use the vessel be unable or unwilling to do so, that party may make the vessel available to another party, but the other party, by accepting such use, shall not thereby forfeit any part of his scheduled use.
- At the end of any party's period of use and, unless otherwise agreed, he shall deliver the vessel to her mooring at Narrows Marina in Tacoma or to any other agreed upon location for exchange--clean, neat, and watered. Refueling of the vessel will be done when the fuel in the tanks is reduced to 80 gallons total, by whichever partner is using the boat at the time of needed fueling.
- The master schedule may be changed only upon: (1) a unanimous vote of the three parties, or (2) sale, by any party, of his financial interest in the vessel.
III. MAINTENANCE
A. It is recognized that a precise measure of time or effort is neither possible nor desirable to establish, but it is the intent of the parties that they share reasonably equally in the physical work involved in maintaining and improving the vessel.
B. The parties will cause to be kept in force and effect on the vessel a policy or policies of insurance, naming each as a party insured, with an insurer, limits of coverage, and such deductible and other clauses as may be mutually agreed upon.
C. No party shall charter or loan the vessel.
D. Any uninsured loss, including the deductible provision of the insurance policy, occurring to the vessel while being used by a party, shall be soley the responsibilty of the party incuring the loss.
IV. TERMINATION-VALUATION
A. Any party, by giving written notice, may terminate this agreement in accordance with the following provisions:
1) Should such notice be given, the remaining parties shall have 30 days from the date of the selling party’s written notice, to purchase the seller’s interest in the vessel, with an adjustment to reflect fair market value at the time of the sale, calculated using the method described in Appendix B. Absent exercise of this right, the provisions of paragraph (2) shall apply.
2) Should such notice be given, the selling party shall continue to pay the monthly fees (as set forth in Appendix A) until a new party, acceptable to each of the remaining parties, purchases the seller’s share, using the calculation procedure described in Appendix B. It is recognized that all parties may nominate prospective buyers. However, it is agreed that the selling party alone has responsibility for selling his share, except where death of the boat partner has precepitated the sale, in which case the surviving boat partners agree to assist the surviving spouse or executor of the estate in selling the share, if requested by the surviving spouse or executor.
3) Upon unanimous written agreement of all parties, the vessel may be sold and the proceeds divided equally among all parties, according to the calculations in Appendix B, after expenses for sale, if any, are deducted.
4) Should the agreement terminate at any time as a result of actual or constructive loss of the vessel, the proceeds of the insurance received as a consequence thereof as well as the balance in the interest-bearing checking account shall be divided equally between all parties according to the calculations in Appendix B. Upon unanimous agreement of all parties, the proceeds of the insurance settlement may be put in an interest bearing account until such time as the parties determine whether they will distribute the proceeds or use them to purchase a new vessel.
B. No party shall assign, pledge, or otherwise encumber his interest in the vessel or in this agreement without the unanimous consent of the other parties.
C. This agreement is intended to govern the conduct of the parties in the exercise of their joint ownership of the vessel for pleasure purposes and shall not be construed to create a partnership. No party shall be liable for the debts or obligations of the other parties and no party is authorized to contract with third parties in behalf of or otherwise to bind the others.
D. This agreement shall inure to the benefit of, and be binding upon the heirs, executors, administrators and permitted assigns of the parties hereto.
In witness thereof, the parties have signed their names below in the presence of a qualified notary public.
Partners: John and Penny Melton:
On this day the above personally appeared before me and executed the foregoing instrument and acknowledged that they signed the same as their free and voluntary act.
Given under my hand and official seal this day of 2007.
Notary Public in and for the State of
Washington
_______________________________________
John Melton Penny Melton
Partners: Derek and Debbie Keith:
On this day the above personally appeared before me and executed the foregoing instrument and acknowledged that they signed the same as their free and voluntary act.
Given under my hand and official seal this day of 2007.
Notary Public in and for the State of
Washington
_____________________________________________
Derek Keith Debbie Keith
STATE OF WASHINGTON) as
COUNTY OF
Partners: Chris and Kristina Wallington:
On this day the above personally appeared before me and executed the foregoing instrument and acknowledged that they signed the same as their free and voluntary act.
Given under my hand and official seal this day of 2007.
Notary Public in and for the State of
Washington
_____________________________________________
Chris Wallington Kristina Wallington
STATE OF WASHINGTON) as
COUNTY OF
APPENDIX A.
Schedule of monthly fees for the yacht MISCHIEF
Obligation $/Month $/Month/Person
Current monthly financial obligation (Incredible LLC dues) will be established by the Incredible LLC members at the annual meeting, or as needed, by unanimous agreement and communicated to all memebers. Members monthly dues will be deposited in the Incredible LLC account. This account shall pay for moorage, insurance, boat registration, maintenance, state park pass, and any other expense which the parties deem necessary.
APPENDIX B
Valuating each party's interest in the event of terminating agreement.
Fair Market Value shall be determined by McKee and Mooney, or another mutually agreed upon yacht broker, and should be based on actual sales records of 1968 32' Grand Banks trawlers in equivalent condition.
The Value of any party's interest will be either:
I ) One-third of the actual selling price, less Financial Deficiencies (FD), plus one-third of the Prepaid Fund (PF), or
2) One-third of the net insurance settlement (including deductibles), plus one-third of the Prepaid fund (PF).
3) FMV/3+PF-FD=SCI
Where:
FMV = Fair Market Value at the time of the sale.
PF = Prepaid Fund, seller's share of prepaid insurance, registration and maintenance fund.
FD = Financial Deficiencies of seller regarding the vessel's shared expenses.
SCI = Seller's Calculated Interest in vessel at time of sale.