[OPEN-ILS-GENERAL] Details of fiscal sponsorship agreement for Evergreen & Conservancy

[Dan Scott]

The Conservancy has added one new member organization since we
received the draft agreement, and it's not us!
(http://sfconservancy.org/news/2010/nov/10/pypy-joins/).

Based on the lack of comments, I'm wondering if anyone has looked at
the Software Freedom Conservancy draft agreement that I posted to the
open-ils-general list on October 21? At the time, I had suggested that
we try to collect a list of questions together by October 28th, a date
that has come and gone.

On the governance list, we've been doing some soul-searching about
whether to establish a small, focused foundation or a very broad
foundation. In principle, I'm not opposed to a foundation that
includes a users' group, various committees, membership fees, etc, but
I worry that getting it right will take a long time - and when dealing
with a scope that broad, I would much rather get things right and take
a long time, than get things done fast but fatally flawed at the
outset.

However, we don't have to exist in the mean time without the benefit
of being part of a 501(c)(3); based on the draft agreement, the
relationship with the Conservancy can be as lightweight as a temporary
home that we can leave in 60 days if another 501(c)(3) can receive the
assets. I've checked with Bradley Kuhn to ensure that would be okay,
and he said "I really don't get why people don't just use as that:
Keep debating the other issues while having a Conservancy membership,
and even move in forming the new org in parallel."

So, based on that, would it be possible to move forward on the
governance front in two tracks?

1) Short-term (e.g. next month?): establish an agreement with the
Conservancy that enables us to take advantage of the benefits of being
part of a 501(c)(3) and provides a neutral place for holding the
Evergreen collateral (trademarks, logos, domain names...). We would
work directly with the Conservancy to establish the ground rules for
our agreement (as Bradley offered when he sent us the sponsorship
agreement - and which we have not as of yet used).  Some projects
simply nominate one person to act as the point of contact with the
Conservancy; it could be as simple as that. If we get set up before
the end of year, then Americans would be able to make tax-free
donations to Evergreen as a Christmas present!

2) Longer-term (e.g. in time for the next Evergreen Conference):
establish the complete set of rules of governance, including standing
committees, membership rules & fees, meeting rules, compensation,
possibly setting up a standalone 501(c)(3)?

Dan

On 21 October 2010 17:00, Dan Scott <dan at coffeecode.net> wrote:
> Please find below the explanation of and attached PDF & Tex documents
> concerning the Evergreen / Software Freedom Conservancy agreement that
> we will need to sign in order to move forward with establishing the
> Evergreen Software Foundation as a member project of the Software
> Freedom Conservancy.
>
> In recognition of Bradley's time, I recommend that we discuss the
> agreement on the list, and compile a list of questions that come up
> during the course of the discussion. Perhaps we can try to pull together
> any major questions by the end of next week (Friday, October 28th)?
>
> ----- Forwarded message from "Bradley M. Kuhn" <bkuhn at sfconservancy.org> -----
>
> Date: Thu, 21 Oct 2010 08:32:17 -0700
> From: "Bradley M. Kuhn" <bkuhn at sfconservancy.org>
> To: Dan Scott <dan at coffeecode.net>
> Subject: Details of fiscal sponsorship agreement for Evergreen & Conservancy
> User-Agent: Gnus/5.13 (Gnus v5.13) Emacs/23.1 (gnu/linux)
>
> I'm glad that you are considering joining the Conservancy and I am
> pleased to extend an invitation to Evergreen.  Attached is a draft of
> the fiscal sponsorship agreement that representatives of Evergreen will
> need to sign in order to join the Conservancy.  (Both LaTeX source and
> PDF are included.) Please read this agreement and share and discuss it
> with all of the key people involved in Evergreen.
>
> As mentioned in my previous email, generally, we leave it for the
> Evergreen community to decide how you'd like to discuss the document, as
> signing such an agreement is a big step for the project and you should
> consider the agreement in whatever forum is most appropriate for your
> community.  I'm happy to answer questions from the community as you
> consider the document, and you should feel comfortable cc'ing me on any
> threads you think I should comment on.  (However, before doing so,
> please make sure I can post back to any lists included in the Cc without
> being formally subscribed.)  Meanwhile, you are also welcome to batch
> questions into one group as well and email them to me directly, and just
> repost my responses.  Basically, whatever works well for you works fine
> for me.
>
> I strongly suggest that you share the agreement draft as wide as
> possible throughout the community, and make sure anyone who has ever
> been a serious contributor to the project in the past or currently is
> made aware of your plans to join Conservancy.  We very much rely on you
> to make sure that your entire community is in agreement with joining
> Conservancy, so please make efforts to be sure everyone has had their
> say.
>
>
> Regarding the agreement, some of the more complex provisions of the
> agreement reflect the special considerations necessary to support the
> Conservancy's tax exempt status.  However, on the whole, I believe that
> this agreement fairly and clearly sets out an advantageous relationship
> for the Conservancy's member projects.  As some of the paragraphs
> specifically indicate, the agreement can be tailored to reflect
> Evergreen's particular needs.  To help you in your review, below is a
> section-by-section walk through, giving an explanation of the
> significance of each provision.  If there are any sections that seem
> confusing or that you feel should be changed to reflect Evergreen's
> needs, please let me know and we can discuss them.
>
>
> Introductory Paragraph
>
> This paragraph identifies the parties to the contract.  It's more
> thoroughly explained in paragraph 6, but the point of this paragraph is
> to name the people who sign the agreement.
>
> Recitals (the "WHEREAS" section)
>
> These paragraphs set forth the basic understandings of the parties.
> Similar to the "preamble" found in the GPL and other Free Software
> licenses, these are *not* operative provisions of the document.
> Instead, they give the context of the agreement.
>
> In this specific case, the key points of understanding are that the
> purpose of Evergreen is to forward Free, Libre and Open Source Software
> (FLOSS) and that both the Conservancy and Evergreen want Evergreen to
> join the Conservancy.  The Conservancy's mission (and charitable
> purpose) is to advance only FLOSS development, documentation, and usage,
> so it is important that this context be stated clearly.
>
> Paragraph 1 - Term of Agreement
>
> This paragraph says that Evergreen is part of the Conservancy as of the
> signing date of the agreement.  It cross references the terminations
> provisions in paragraph 7 (which is explained in greater detail below).
> Note, though, that Evergreen can choose to leave the Conservancy at any
> time.
>
> Paragraph 2 - Project Management and Activities
>
> a) Both parties agree that Evergreen will be FLOSS.  As noted above,
>   this is the fundamental goal and charitable purpose of the
>   Conservancy.  The Conservancy will not and cannot sponsor proprietary
>   projects.
>
> b) This clearly sets out the limits of the Conservancy's management over
>   Evergreen.  Due to requirements connected to Conservancy's tax exempt
>   status, the ultimate legal control of the projects must be with the
>   Conservancy.  From the IRS's perspective, the projects are part of
>   the Conservancy, and the purpose of its tax exemption is to forward
>   the FLOSS mission of those projects.
>
>   However, the Conservancy does not want to interfere with the
>   successful software development, documentation and advocacy work
>   already underway in member projects; such activity should continue
>   after the agreement without interruption or interference.  This
>   paragraph delegates some of Conservancy's legal authority back to the
>   developers, so that Evergreen can run itself in day-to-day matters.
>
>   The only limitations that we must place are to prevent Evergreen from
>   producing non-free software (as per Conservancy's charitable purpose)
>   and from spending money or conducting activities that would
>   jeopardize the Conservancy's tax exempt status.  All the ordinary
>   activities of FLOSS projects come well within these limitations.
>   Some specific activities that are restricted include lobbying
>   activities and spending money in ways other than consistent with the
>   charitable purposes of the Conservancy (i.e., forwarding FOSS).
>
>   Note that developers of Evergreen in their capacity as individuals
>   (when not representing Evergreen still may engage in for-profit
>   service businesses related to their FLOSS work.  The work of
>   Evergreen itself must fit the guidelines, but individuals are free to
>   act in their own capacity in other endeavors, as long as they clearly
>   state that they are not acting on behalf of the project when they do
>   so.
>
>   If you are ever concerned that a particular activity -- be it one
>   carried out for Evergreen or one that an individual developer engaged
>   in independently -- might be a problem, you can always ask the
>   Conservancy for clarification.
>
> c) As discussed above in (b), this section describes the corporate
>   relationship of the project and the Conservancy.  For clarity, it
>   refers to section (b), which delegates the actual management of
>   Evergreen to the relevant developers.  Conservancy, when acting as a
>   fiscal sponsor, must have the legal authority to manage Evergreen
>   even though section (b) delegates the day-to-day operations to the
>   developers.
>
> d) This section clarifies that Evergreen can't represent the Conservancy
>   without getting written authorization first.  If you'd like to
>   represent the Conservancy at a conference or other such event, you
>   can always talk to us about it.
>
> Paragraph 3 - No Fees
>
> It's just as it sounds.  The Conservancy provides services to projects
> to benefit the FLOSS community and does demand member projects to bear
> the overhead costs.  Projects are encouraged to make donations to the
> Conservancy as a percentage of their funds to assist the Conservancy
> with its operating expenses.  Please note, though, that Conservancy is
> only able to provide its services to member projects because there is a
> reasonably healthy general fund available.  Donations from our member
> projects are not the only source of general fund revenue, but it is a
> substantial component in Conservancy' sustainability plan.
>
> Therefore, if you choose to do so, this section provides suggested
> wording in brackets for donating a percentage of the Project's income to
> be used towards keeping the Conservancy up and running (10% is a very
> common rate that many umbrella organizations require for their fiscal
> sponsorship services).
>
> Paragraph 4 - Project Fund/Variance Power
>
> This sets out the financial structure in connection with the
> relationship described above in paragraph 2. Conservancy will separately
> account for Evergreen's revenue (and Evergreen will have its own bank
> account at the Conservancy once its balance reaches $3,500).  For tax
> purposes, Conservancy will report all of the income to Evergreen in its
> IRS and state filings.  Evergreen therefore will not need to file any
> separate tax documents with the IRS.  Conservancy will keep the
> financial books for Evergreen, sending periodic reports to the project's
> developers.
>
> The developers will direct the Conservancy to spend the money on behalf
> of Evergreen within the limitations imposed by the tax laws and
> Conservancy's 501(c)(3) mission.  Conservancy will receive any checks on
> behalf of Evergreen, and it will also write checks on behalf of
> Evergreen.
>
> Paragraph 5 - Project Fund Management/Performance of Charitable Purposes
>
> This paragraph clarifies that all assets will be devoted to the
> project's purposes, as those purposes are a subset of the Conservancy's
> purposes.  Assets cannot be used in connection with activities that
> would jeopardize the Conservancy's tax exempt status.  As discussed
> above, in practice, most typical expenses of FLOSS projects will come
> well within these limitations.  Activities that are restricted include
> lobbying activities and spending money in ways other than consistent
> with the charitable purposes of Conservancy (i.e., forwarding FLOSS).
>
> Paragraph 6 - Representation of the Project in the Conservancy
>
> As the note in this section indicates, we understand that each project
> will have its own management structure that it has developed to reflect
> its size and community.  This paragraph requires that certain
> representatives be named as the individuals that can officially
> communicate decisions on behalf of Evergreen.  This can be a single
> maintainer, a committee of developers or a few specified
> representatives.
>
> To the extent that it makes sense for Evergreen to have a committee of
> representatives, we should indicate how decisions can be made by that
> committee.  For example, should all decisions be communicated to the
> Conservancy by all members of the committee or would a simple majority
> suffice?  Can any one representative communicate official decisions on
> behalf of all?  Evergreen should also consider adding a mechanism here
> for adding and removing representatives over time.  We're happy to
> discuss methods that have worked for other projects with you to help you
> select the solution that is right for you.
>
> We generally find this is the most difficult provisions for projects to
> work out, as it does require that your project consider the form and
> type of leadership structure it wants to have, and that structure will
> be legally formalized in this document for perpetuity.
>
> Paragraph 7 - Outstanding Liabilities
>
> In this section, Evergreen confirms that it has told the Conservancy
> about any liabilities that might be outstanding prior to joining the
> Conservancy.  This gives the Conservancy some assurance that its due
> diligence process has been complete and that the Conservancy's Board
> received all of the information it needed to properly evaluate the
> project.  Liabilities include, for example, financial obligations, such
> as any debts or outstanding bills, or any legal claims that could be
> outstanding against Evergreen.
>
> If you believe some liabilities exist, or that something may be a
> liability and aren't sure, please err on the side of letting Conservancy
> know about it.
>
> Paragraph 8 - Termination
>
> Projects can leave Conservancy at will.  This section sets out the
> mechanisms for termination to make sure that when a project leaves the
> Conservancy it does so without jeopardizing the tax exempt status of the
> Conservancy (and, consequently, the status of all of the other projects
> in the Conservancy).
>
> There is a 60 day notice requirement so that a new tax exempt non-profit
> can be found for Evergreen to join.  If there isn't another fiscal
> sponsor or other tax exempt non-profit to take over Evergreen, Evergreen
> can incorporate as a separate entity and apply for tax exemption
> recognition.  If there is no separate entity -- for example if a project
> loses momentum and has been abandoned by its developers -- the
> Conservancy must be left with the assets for use by the Conservancy for
> other FLOSS-related charitable work.
>
> These restrictions would also apply to any separate tax exempt entity,
> so if Evergreen were to incorporate and achieve tax exemption outside of
> Conservancy, it would have to deal with the same considerations upon any
> wind-up or distribution of assets.  Members of the Conservancy's board
> are familiar with non-profit wind-down situations, and can assist in the
> unlikely event that this unfortunate outcome occurs.
>
> Paragraph 9 - Miscellaneous
>
> These provisions are standard agreement boilerplate - they clarify the
> enforceability of separate provisions, specify that the contract be
> governed by New York Law and state that any amendments to this agreement
> need to be agreed to in writing by all of the parties.
>
> Paragraph 10 - Counterparts/Facsimile
>
> Although it's good to have original signatures in the corporate records,
> this allows you to simply scan a copy for the contract to take effect.
>
>
> We hope this explanation document has made it clear why the agreement is
> structured in this way.  If any provisions seem problematic to you, let
> us know and we'll work with you to try to build an agreement that works
> for both of us.  We look forward to Evergreen joining the Conservancy!
>
>
> --
> Bradley M. Kuhn, Executive Director, Software Freedom Conservancy
>