# Drafting and completion guide

This guide is educational and non-operative. It is not part of the memorandum and must not be attached or incorporated by reference unless counsel intentionally directs otherwise. Read the [disclaimer](./DISCLAIMER.md) first.

## What this template is—and is not

It is a short-form record of what a group of venture partners have agreed in principle, written down before definitive agreements exist. Its purpose is to make disagreement visible early, while it is still cheap, and to give counsel a clear brief to draft from.

It is not a founders' agreement, an operating agreement, an investor term sheet, or a contract to form a venture. Clauses 1 through 8 are intent. Only Clause 9 is written to bind.

Keep it short. Length is the point: a document people will actually read, argue about, and sign in a week is worth more at this stage than a thorough one that sits unsigned for a quarter.

## Field legend

- `[REQUIRED: …]` — must be completed before signature.
- `[SELECT ONE: …]` — choose one option and delete the others.
- `[OPTIONAL: …]` — keep only after an informed decision.
- `[COUNSEL: …]` — requires individualized legal or tax review.
- `[DRAFTING NOTE: …]` — instruction only; remove before signature.

The canonical memorandum retains visible bracketed fields because it is a template. A signed copy must not contain unresolved brackets, examples, field labels, or drafting notes.

## Completion checklist

- Confirm full legal names of every Partner and the exact venture name.
- Set a realistic outside date for definitive agreements, and treat it as real — the memorandum expires on it.
- Write Clause 1 as one specific sentence. If the Partners cannot agree on that sentence, stop; nothing below it will hold.
- Choose the entity type and jurisdiction with counsel, against tax treatment, equity-compensation plans, and investor expectations.
- Make the equity table add to 100%, including the option pool, and state what each Partner is giving in return.
- Decide vesting, commencement, cliff, and acceleration explicitly. Do not leave vesting to the definitive agreements.
- State compensation beyond equity, including accrued or deferred amounts and whether they convert to equity.
- Give each Partner a small number of outcomes they own, not a list of activities.
- Set the approval threshold and the specific dollar figures above which a decision stops being one person's to make.
- Name a deadlock path with a time limit.
- Inventory background intellectual property by name. "None" is a valid and useful answer.
- Complete every row of the exit table. This is the section most often left vague and most often regretted.
- Fix the confidentiality period, the exclusivity scope and carve-outs, the governing law, and the dispute path.
- Have counsel confirm the binding posture in Clause 9 before signature.
- Remove all instructions and unresolved fields; confirm the result has not grown beyond two pages.

## Concepts partners should understand

### Binding posture

A document is not non-binding because it says so. Conduct, partial performance, and the wording of individual clauses can create obligations, and some jurisdictions recognise a duty to negotiate in good faith once parties have signed a document of this kind. Clause 9 is drafted to make the line explicit, but only counsel can confirm where the line actually falls under the governing law.

### Equity is not the same as ownership

The percentages in Clause 3 describe what the Partners intend to issue. Ownership becomes real when an entity exists, equity is issued under purchase documents, consideration is paid, and the capitalization records reflect it. Equity issued for services or subject to vesting can create tax and filing consequences, some of them time-sensitive. Get advice before issuance, not after.

### Roles decay without accountability

Titles are cheap and change often. What matters in Clause 5 is the column of outcomes each Partner owns and the threshold at which a decision leaves their column. Review both when the venture's stage changes.

### Exit intent

Most founder disputes about selling a company are not disputes about price. They are disputes between people who never established whether they were building a company to sell, a company to hold, or a company to run. Clause 7 exists to surface that early, when it is a conversation rather than a conflict. Record the honest answer, including "no predetermined outcome" where that is the truth — a recorded disagreement about the exit is more useful than an assumed agreement.

Drag-along and tag-along rights are noted here as intent only. They have to be drafted into the definitive agreements to exist.

### Expiry

The outside date is a feature. If the Partners will not sign definitive agreements by then, that is information about the venture, and the memorandum ending is the correct outcome rather than a failure.

## What this converts into

Depending on the facts, the memorandum should be followed by:

- entity formation documents and any required filings;
- a founders' agreement or operating agreement — the [Awake Cofounder Agreement](../awake-cofounder-agreement/) is designed to receive this memorandum's terms;
- founder equity purchase documents with the agreed vesting, plus capitalization records;
- invention-assignment, confidentiality, employment, and contractor agreements;
- securities notices, exemptions, and filings;
- an equity incentive plan for the reserved option pool; and
- tax registrations, elections, and filings.

Signing this memorandum does not by itself complete any of those actions.