Bakery Partnership — Final Agreement

The full draft agreement generated by the Mediator.ai engine for Maya and Daniel's bakery partnership restructure.

This draft agreement was generated by the Mediator.ai engine from Maya’s and Daniel’s position statements. It is not a substitute for legal advice — both parties are encouraged to have it reviewed by counsel before signing.

PARTNERSHIP RESTRUCTURING AND INVESTMENT AGREEMENT

PREAMBLE

Maya and Daniel acknowledge that they founded this bakery together as equal partners with shared vision and mutual trust. Both parties affirm their desire to continue working together and to welcome the proposed investment while ensuring their partnership reflects the current reality of their contributions. This agreement honors the original handshake while adapting to how the business has evolved.

SHARED COMMITMENTS

1. Continuity of Partnership. Both parties commit to remaining active partners in the bakery. Neither party is being bought out or reduced to employee status. This agreement strengthens the partnership by making expectations explicit.

2. Value of the Investment Opportunity. Both parties recognize that the $80,000 investment at a 20% stake values the current business at $320,000 (pre-investment). Both parties want this deal to close and understand that clarifying the ownership structure is a necessary condition.

3. Recognition of All Contributions. The parties acknowledge that the bakery’s success depends on both the product Daniel creates each morning and the business operations, customer relationships, and growth initiatives Maya manages. Both contributions are essential and valued.

EQUITY RESTRUCTURING

4. Revised Ownership Split. Effective upon execution of this agreement and prior to the investor transaction:

  • Maya: 60%
  • Daniel: 40%

This split reflects the asymmetry in working hours and scope of responsibilities over the past 18 months while preserving Daniel’s position as a substantial minority partner with meaningful ownership.

5. Equity Restoration Path. Daniel may restore his ownership to 50% through either pathway:

  • Option A (Return to Full-Time): If Daniel returns to working 35+ hours per week in the business (including but not limited to production, counter work, supplier relations, or administrative duties) for six consecutive months within the next 18 months, his equity automatically increases to 50%. “Full-time” hours will be tracked through a simple shared log both parties initial weekly.
  • Option B (Compensation Adjustment): If Daniel continues his current schedule but foregoes distributions equal to $24,000 over the next 24 months (applied quarterly at $3,000/quarter), his equity increases proportionally. At full contribution ($24,000), he reaches 50%. Partial contributions result in proportional increases (e.g., $12,000 foregone = 45% equity).

Daniel may choose either pathway or switch between them with 30 days’ notice. If Daniel pursues neither pathway, the 60/40 split remains permanent.

COMPENSATION FOR PAST CONTRIBUTIONS

6. Recognition of Daniel’s Personal Subsidies. Maya acknowledges that Daniel covered rent and personal expenses during the first 14 months of his part-time period, and that Daniel has not taken distributions for over a year while Maya has taken modest distributions.

7. Recognition of Maya’s Additional Labor. Daniel acknowledges that Maya has worked significantly more hours and taken on administrative, marketing, and management responsibilities that extend well beyond the scope of a 50/50 labor split.

8. Balancing Mechanism. Rather than attempt a precise accounting of past contributions (which both parties agree would be contentious and incomplete), the parties agree that:

  • The 60/40 equity split acknowledges Maya’s disproportionate labor contribution.
  • Daniel’s equity restoration pathways acknowledge his personal financial support and deferred compensation.
  • No further claims will be made regarding the 18-month period prior to this agreement.

GOING-FORWARD OPERATING TERMS

9. Role Clarity.

  • Daniel’s Primary Responsibility: Production (baking, recipe development, ingredient quality control). Minimum commitment: 25 hours/week including all weekday morning bakes.
  • Maya’s Primary Responsibility: Operations (staff management, supplier relations, financial management, marketing, customer relations). Minimum commitment: 40 hours/week.

If either party fails to meet their minimum commitment for more than two consecutive weeks without medical or family emergency, the other party may call a mandatory partnership meeting to address the deviation.

10. Decision-Making Authority.

  • Day-to-day operations (under $500): Whoever is handling that domain (Daniel for production, Maya for operations) has decision-making authority.
  • Significant expenses ($500–$5,000): Require agreement of both partners, but neither may unreasonably withhold consent.
  • Major decisions (over $5,000, new locations, additional investors, sale of business): Require unanimous agreement.

11. Distribution Policy. Beginning in the quarter following the investment closing:

  • Distributions will be made quarterly if the business maintains a cash reserve of at least $15,000.
  • Distributions will be made pro-rata according to current equity percentages.
  • Either partner may defer their distribution with 10 days’ notice before the distribution date; deferred amounts remain in the business.

12. Salary for Disproportionate Management Work. Recognizing that Maya’s operational role requires significantly more hours than Daniel’s production role, Maya will receive a management salary of $2,000/month beginning the month after investment closing. This salary is an operating expense paid before profits are calculated for distribution. If Daniel assumes management responsibilities that bring his working hours to parity with Maya’s (documented through the shared log), the management salary will be discontinued or split proportionally.

INVESTMENT TRANSACTION TERMS

13. Investor Equity and Use of Funds. Both parties agree to sell a combined 20% equity stake to the investor for $80,000, structured as:

  • Maya sells 12% (from her 60% position).
  • Daniel sells 8% (from his 40% position).

Post-investment ownership:

  • Maya: 48%
  • Daniel: 32%
  • Investor: 20%

If Daniel subsequently restores equity to 50% under Section 5, the restoration comes from Maya’s share, resulting in:

  • Maya: 40%
  • Daniel: 40%
  • Investor: 20%

14. Allocation of Investment Proceeds. Of the $80,000 investment:

  • $30,000 to Maya (for her 12% equity sold).
  • $20,000 to Daniel (for his 8% equity sold).
  • $30,000 remains in the business for working capital, equipment upgrades, and expansion of the product line.

The personal payments to Maya and Daniel recognize that both have deferred compensation and subsidized the business personally. The in-business allocation ensures the investment serves its intended purpose of growth capital.

DISPUTE RESOLUTION AND PARTNERSHIP CONTINUITY

15. Informal Resolution First. If disputes arise, both parties commit to first attempting resolution through direct conversation, with a written summary of each party’s position and proposed solution.

16. Mediation. If direct conversation does not resolve the dispute within 14 days, the parties will engage a neutral small-business mediator (cost split equally) before pursuing any legal action.

17. Buy-Sell Provision. If the partnership becomes untenable, either party may trigger a buy-sell:

  • The initiating party names a price for 100% of the business.
  • The other party may choose to either (a) buy the initiating party’s stake at the proportional price, or (b) sell their stake to the initiating party at the proportional price.
  • The investor’s 20% is not part of this mechanism and remains with the business.
  • Payment terms: 20% down, remainder over 24 months at prime + 2% interest.

18. Right of First Refusal. Neither Maya nor Daniel may sell their equity to a third party without first offering it to the other partner at the proposed price and terms. The other partner has 30 days to accept.

FINAL PROVISIONS

19. Entire Agreement. This agreement supersedes the original partnership agreement and any oral understandings. It may only be amended in writing signed by both parties.

20. Governing Law. This agreement is governed by the laws of the jurisdiction where the bakery operates.

21. Execution. This agreement becomes effective when signed by both Maya and Daniel, and must be signed before the investor transaction closes.

Disclaimer: This agreement is drafted based on the parties’ position statements and reflects an attempt to find mutual ground. It is not a substitute for legal advice. Both parties are encouraged to have this agreement reviewed by independent legal counsel before signing, and to consult with a tax advisor regarding the treatment of the equity transactions and salary arrangement.